The UK Equity Death Spiral: A Drain on the Lifeblood of British Business

A very concerning trend has emerged in the financial landscape of the United Kingdom. One that threatens the very foundations of British business - a significant and steady decline in domestic investment in UK equities. The combined ownership of UK quoted equities by insurance and pension funds has dramatically fallen from 45.7% in 1997 to just 4.2% in 2022, marking the lowest level ever recorded. This shift poses a grave risk to the UK economy's stability and sustainability. The reasons for this dramatic shift are multifaceted. The allure of higher returns from investments overseas has increasingly drawn investors away from the UK market. Additionally, changes in pension fund regulations have prompted a cautious move towards less risky assets, diminishing the appeal of equities generally. As domestic investors retreat from the UK market, foreign investors have stepped in to fill the void, with their share of the UK market soaring to 57.7% by the end of 2022, up from 30.7% in 1998. However, the overall effect is that the gulf between the valuations of UK equities and overseas equities has become steadily larger. SCM Direct analysed the 10 largest FTSE 100 stocks currently, that account for nearly half the FTSE 100...

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