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UK Stock Market Statistics
Last revised July
2007
This
note is intended to give some background on the ownership of shares in
public companies that are listed on UK stock markets, and the trading that
takes place in them. It also covers the particular characteristics of the
private shareholder, that are of most concern to the UK Shareholders
Association. Information has been gleaned from various sources and
acknowledgements are given where appropriate - such sources often have more
detailed information if you need it. Unfortunately several of the surveys
referenced in this note are out of date and have not been repeated recently,
so care should obviously be taken in interpreting the information.
The London Stock Exchange
The
London Stock Exchange operated markets in 1139 “Listed” Companies as at June
2007 - down from 1257 in May
2005 (source of this and other data in this section and the following
section is the London Stock Exchange). In addition it operates the AIM
market (1656 companies at the same date - up from 1200 in May 2005), which is a less regulated market
and comprises mainly smaller companies. There has of course been a tendency
for smaller fully listed companies to move to AIM in the last few years for
various reasons, and the numbers of listed companies have otherwise been
reduced by bids from private equity vehicles.
The
“Listed” market is typically classified into 100 stocks which are the
largest capitalisation companies (and make up the FTSE 100 index), FTSE 250
companies which are the next largest (and together with the FTSE 100 stocks
make up the FTSE 350), and the “Smaller Companies” which make up the rest.
The
total market capitalisation in June 2007 was £2,014 billion, but 136
companies had a market cap of more than £2 billion and represented 85% of
the total so you can see that the FTSE 100 companies dominate the “listed”
market. In addition, even within the FTSE 100 there is a strong predominance
of a few larger contributors, typically truly international businesses, such
as Shell, BP, GlaxoSmithKline and Vodafone.
However, the AIM market has been growing rapidly in recent years and had
a total market capitalisation of about £100 billion in June 2007.
Note
that there are a few share trading facilities other than the London Stock
Exchange in the UK, such as Plus Markets (formerly called Ofex) for smaller companies, but the trading
volume on such markets is typically quite small.
Share Trading
In
2004, the total value of equity shares traded on the London Stock Exchange
was £2,316 billion and there were 54 million “bargains”.
The
last breakdown of share trading volumes was published by the London Stock
Exchange at the end of 2000, and the following is a brief summary.
-
91% of trades were on behalf of UK clients as opposed to foreign clients
(32% of shares were owned by foreign clients at this time according to the
ONS).
-
Private clients created 65% of trades by number, but only 8% by value. It
is worth pointing out how valuable therefore the role of private investors
is in creating a liquid market, particular in smaller companies where
institutional trading is often very small.
-
The average trade size for UK institutions was over £200,000 but only
£7,800 for private clients (and the latter was falling although the
numbers were increasing, presumably because of lower cost trading
facilities and the influence of internet trading).
Compeer perform an annual survey of stockbrokers on behalf of APCIMS, and
reported in 2003 that 20% of firms “execution only” business were in
“certificated” form, down from 30% in 2002. Online trades accounted for 43%
of execution only business.
Share Ownership
The
Office of National Statistics published information in July 2007 for the
2006 year on the ownership of
UK
shares. They reported the following:
- A
total market capitalisation of £1,858 billion at the end of 2006 (an
increase from £1,480 bn at the end of 2004).
-
UK private individuals owned £239 billion (ie. 12.8%) - down from 14.0% in
2004.
-
UK insurance companies held £273 billion.
-
UK pension funds held £236 billion.
-
UK Banks held £63 billion.
-
UK Unit trusts held £30 billion and Investment Trusts £45 billion.
-
Other UK financial institutions held £179 billion.
-
UK charities held £16 billion.
-
Foreign investors held £742 billion (41%).
Note
that the proportion held by foreign investors had risen from 16% in 1994 to
41% in 2006, with this growth mainly coming at the expense of domestic
insurance companies, pension funds and private individuals. These trends
continued in the 2004 to 2006 period. The proportion
held by private individuals has fallen from 20% in 1994 to 13% in 2006 -
this is probably the result primarily of the government providing
preferential tax rates to savings in pension funds, or via insurance
policies. Also it is important to point out that the role of
“privatisation” and “demutualisation” share issues (where public utilities
and financial institutions were sold off to small shareholders, often at
bargain prices) may have distorted the picture in that period. Many such
shareholders have clearly subsequently disposed of their holdings rather
than become long term stock market investors as was once hoped.
Pension fund and insurance company holdings have probably declined in recent
years due to concern about stock market performance, more stringent rules on
asset ratios and minimum funding requirements, and a general trend to invest
more in fixed interest stocks.
Individuals now
hold 50% of the shares in investment trusts (up from 38% in 2004).
In 2004, individuals held a higher proportion of non FTSE 100 companies, at 19%, than
other types of holders. They only held 13% of FTSE 100 companies. These
figures probably represent the typical institutional aversion to smaller cap
stocks combined with significant holdings by executive management in smaller
companies.
Private Share Ownership
Proshare in conjunction with Computershare and Mori Financial Services
undertook a survey of over 1000 private shareholders in 2002. Together with
other data, some of the conclusions were as follows:
-
22% of adults held stocks or shares, but 12% held only “privatised” or
“demutualised” shares.
-
The median value of share portfolios was about £5,000, and the median
number of companies held was only 3.
-
89% held some shares in the form of share certificates, 31% held some in a
PEP/ISA nominee account, 50% held some in a brokers nominee account, 12%
held some in a company nominee account, and only 4% held some in a
personal Crest account.
-
The average number of trades executed in the last 12 months was 3. Note
though that this appears to represent a wide distribution with probably a
few active traders (less than 10% of the total) and a large number of
inactive traders (with zero or 1 trade per year).
The above information is
consistent with the figures on private share ownership published in the
Department for Work and Pensions survey last published in 2005/6 - see
www.dwp.gov.uk/asd/frs/2005_06/index.asp where it suggests that 20% of
UK households hold shares.
Clearly from the above data, there are an enormous number of shareholders in
the UK (about 10 million perhaps) but the vast majority hold only a few
shares, and many of those will have come from privatisations,
demutualisations or from former employments. Such shares are rarely traded.
It was reported
in the Investors Chronicle in December 2005 that private client stockbrokers
held about 500,000 "discretionary accounts" and 400,000 "advisory" accounts
for clients, although the latter had fallen by 200,000 in the last five
years with a strong trend, encouraged by the brokers, for clients to move to
discretionary accounts.
Electronic versus Paper and Numbers of Holdings.
Private shareholders in listed companies in the UK can currently hold shares
in three forms:
-
In paper
share certificates (probably to be replaced by a new “name on register”
electronic system over the next few years).
-
As a
personal Crest member where effectively a stockbroker “manages” the account
but the shareholders name is on the company share register.
-
Through a
brokers or company nominee account.
All
trades in the last two types would be via the Crest system, and it is
estimated that 85% of shares are held within that system. But the 9 million
retail shareholders who hold share certificates generate about 30,000 trades
per business day (source: Crestco) - effectively these shareholders only
trade on average about once per year.
There are about 40,000 personal Crest members and the numbers are rising (up
from 31,000 in 2001 when they represented holdings of £1.5 billion, ie.
about £50,000 per shareholder on average). These may be shareholders with
substantial portfolios, and they are likely to trade more actively.
It is
estimated that there are approximately 4 million people with nominee
accounts, with 23 million shareholdings in those accounts (ie. holdings by
beneficial shareholders in nominee accounts). (Source: Shareholder Rights
Working Party submission to the DTI, 2005). Note though that many of these
accounts are holdings in a company nominee account, such as those of HBOS,
where shareholders in a “demutualisation” were placed into such a nominee. |
