Britons are the worst investors in Europe and have around £1.8trn sitting idle in savings accounts, around the entire value of the FTSE 100, a new report released today has found.
UK retail investors own just 21p of £1 of stocks and bonds and other assets, the lowest proportion in Europe, according to right-of-centre think tank the Centre for Policy Studies (CPS).
French retail investors have 28 per cent stake in all the country’s assets, while those in Germany own more than a third. Spanish investors hold 84 per cent of the country’s assets.
Britain’s rock bottom ranking reflects consumers’ cautious approach to maximising their finances, prioritising saving over stock market participation, the CPS’s report argues.
Just 12 per cent of London-listed shares are owned by UK residents, a huge decline from more than 50 per cent in the 1960s.
Poorer and middle income families are opting to leave their cash in accounts that yield slim returns.
CPS analysis of HMRC data found around 90 per cent and 80 per cent of the least wealthiest and middle class families respectively elect to open cash Individual Savings Accounts (ISAs) instead of vehicles that invest in equities.
Though such accounts come with a lower risk of dropping in value, they tend to extract lower returns. About 50 per cent of richer investors open stocks and shares ISAs.
Low participation in stock market investing among less well off households is “increasing wealth inequality significantly,” the CPS said.
Scorching inflation, which is running at 8.7 per cent and had been in the double digits for around half a year, is wiping out the value savings, which the CPS said is “positively disastrous” and should prompt an overhaul of the retail investor regime.
Those deciding to leave their money in saving accounts are getting a thin deal. The average rate offered by high street banks is around two per cent.
The Thatcherite CPS economic think tank said the government should consider merging cash and stocks and shares ISAs into a single product and require a proportion of shares made available in new listings to be offered to retail traders to reverse low retail investor activity.
They also said a taxpayer-backed fund that operates like a FTSE 100-tracker vehicle would help crowd in retail investment.
Higher retail ownership of Britain’s largest companies would give “people an opportunity to shape the companies they invest in – to literally become an owner, which includes the right to vote on corporate pay, environmental issues and governance”.
“More retail investment gives people a stake in the society and the economy of which they are part,” the report said.
The findings come amid a push from top City figures and ministers to get Brits invested back in the stock market.
The City minister Andrew Griffith said “come back Sid” to a conference last month in reference to the iconic 1980s Thatherite campaign to get Brits buying up shares in privatised British Gas, while M&S chair Archie Norman has been calling for Brits to pile into big domestic firms.
The chief of the stock exchange Aquis, Alasdair Haynes, who recently said of the need to “make equities sexy” to the public, said today that “retail investing is far too low in the UK
“We need to make equity investing simple and easy to access, providing all investors with all of the information they need to make an informed decision at their fingertips,” he added.
“As a challenger stock exchange, this is the central problem that we are trying to look at: how can we reconfigure UK markets to meet the needs of today and tomorrow’s investors? Ultimately it’s about getting the public back into public markets – and making equities an attractive option again as part of a long-term investment plan.”