Latest ONS survey: steady as she goes…and ignore retail investors at your peril

09 May 2022 / Insight

By Keith Hiscock, Yingheng Chen

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The ONS (Office for National Statistics) has been charting the beneficial ownership of UK quoted companies periodically since the early 1960s. The latest paper was published in March 2022, and considers the data for December 2020.

The long view

The ONS surveys have identified three key themes over the past 60 years:

  • The rise of overseas investors. In 1963, London was, essentially, a domestic market, even though it was home to international businesses like ICI and the old “colonials”, such as rubber plantations. Big Bang, in 1986, was the start of a revolution. Since then, London has been seen as a listing venue of choice for companies from all over the world and, at the same time, has been transformed into a theatre for international investors. “Rest of the World” investors owned 7% of the market in 1963, which had shrunk to just 3.6% by 1981; the most recent survey logged them at 56.3% (2020).
  • UK institutional investors discovered the equity market in the early 1960s, and came to dominate it by Big Bang. Their ownership peaked at 68.2% in 1981. Since then, their influence has declined, due partly to the rise of overseas investors, and partly to a move to more risk-averse approaches by, for example, pension funds. They remain important, but less so than many advisors believe, particularly for generating liquidity, and in price formation. In the latest survey, their ownership lies at 31.6%.
  • The decline and subsequent recovery of the retail investor. Back in 1963, the man in the street owned 54% of all the shares in issue on the London Stock Exchange (LSE). By 2012, this had fallen to a low point of 10.1%. This has since recovered. The most recent survey shows a small decline from the previous to 12%.

Why does retail matter?

  • Individuals are the third-largest investor group in the FTSE 100, and the second- largest in non-FTSE 100 fully listed shares and AIM stocks.
  • Individuals remain more critical to liquidity than most company managements understand, or capital market professionals admit. The latest data show that more than 80% of Main Market companies had an average trade size of less than £10,000, and the figure approaches 90% for AIM.
  • The pandemic has accelerated changes in investor engagement, some of which have made it far easier to build a relationship with the retail investor market. This paper gives some practical ideas on how to improve retail engagement. Some companies now believe this is part of the “G” in ESG.