ONS Publishes Report On Foreign Ownership Of UK Shares

by Philip Morton, Investors Offshore.com

18 July 2007

Figures published last week by the Office for National Statistics (ONS) have revealed that investors from outside the UK owned 40% of UK shares listed on the UK Stock Exchange at the end of 2006. This was up from a 36% share at end-2004.

At the end of 2006, the UK Stock Market was valued at GBP1,858 billion – an increase of GBP378 billion (26%) since the end of 2004.

According to the ONS, 'rest of the world' investors now hold GBP742 billion of UK shares – up from GBP538 billion at the end of 2004. Of this, GBP245 billion (33%) was held by investors based in North America.

The increase since 1994 (when foreign investors held 16% of UK shares) partly reflects international mergers where new companies are listed in the UK, flotation of UK subsidiaries of foreign companies in which the parent has retained a significant stake, and companies moving their domicile to the UK, the report explained.

Other key findings included:

• UK individuals owned GBP239 billion of shares (13%), down from 14 per cent in 2004.
• Insurance companies owned GBP273 billion (15%) - down from 17% in 2004. The percentage holdings of pension funds have also reduced to 13% (GBP236 billion) from 16% in 2004. Since 1999 there has been a trend for pension funds to move towards bond investment, and some pension funds have moved away from equities entirely.
• After a significant rise between 2000 and 2001 (3% to 7%), holdings of UK shares by ‘other’ financial institutions’ have gradually increased to 10% (GBP179 billion) at the end of 2006.
• Banks own GBP63 billion (3%) of UK shares – their highest proportion since the survey began in 1963.

FTSE 100 companies continue to dominate the UK stock market, the ONS revealed. The proportion of funds invested in these companies varies between 58% for individuals and 83% by overseas investors. Overall, 76% of equity investment is in FTSE 100 companies.

More generally, the long term trend shows that the percentage of shares held by foreign investors and 'other' financial institutions continues to increase, while the percentage holdings of individuals, insurance companies and pension funds is decreasing

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