Ownership of UK Quoted Shares: 2012

The value of ordinary shares held in UK incorporated companies listed on the London Stock Exchange by sector of the owner, with a county breakdown for shares owned outside the UK.

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Contact:
Email Harry Duff

Release date:
25 September 2013

Next release:
To be announced

1. Main points

  • The Ownership of UK Quoted Shares Bulletin provides estimates of ordinary shares holdings in quoted companies in the UK by sector of beneficial ownership (the beneficial owner is the underlying owner, the person or body who receives the benefits of holding the shares, for example income through dividends. See Annex A for a more detailed discussion)

  • At the end of 2012, the UK stock market was valued at £1,756.3 billion

  • Rest of the world investors continue to hold significantly more shares (in terms of value) than any other sector, with the gap between rest of the world ownership and the next highest (individuals) widening in 2012. Rest of the world ownership stood at an estimated 53.2% of the value of the UK stock market at the end of 2012, up from 30.7% in 1998 and 43.4% in 2010

  • UK individuals owned an estimated 10.7% by value at the end of 2012, picking up slightly from the record low in 2010 and halting the downward trend seen in recent years

  • Unit trusts held an estimated 9.6% by value at the end of 2012, continuing the strong growth seen in recent years

  • Other financial institutions held an estimated 6.6% by value at the end of 2012, significantly down on the levels in 2010, following strong growth in earlier years

  • Insurance companies held an estimated 6.2% by value at the end of 2012, continuing the fall seen in recent years

  • Pension funds held an estimated 4.7% by value at the end of 2012, down from 5.6% in 2010, and significantly lower than the levels seen in recent years

  • Shares are increasingly held in multiple-ownership pooled accounts, where the beneficial owner is unknown. These accounted for an estimated 59.4% of the total holdings by value at the end of 2012, up from 44.9% at the end of 2010. Multiple ownership pooled accounts have been allocated to sectors using further analysis of share registers, updating the analysis conducted for the 2010 results

  • This Bulletin incorporates some revisions to the 2010 data published in February 2012

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2. Holdings of UK quoted shares by sector of beneficial owner

Figure 1 shows how the value of UK quoted shares was distributed between the sectors of beneficial owner at 31 December 2012. Table 1 compares the 2012 estimates with the estimates for 1998 and 2010.

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3. UK stock market

The UK stock market covers the total value of UK shares listed on the London Stock Exchange. Between 1 January 2011 and 31 December 2012 the value of all UK ordinary shares quoted on the London Stock Exchange increased slightly from £1752.3 billion to £1756.3 billion, an increase in value of 0.2%.

Since the 1980s, UK stock market indicators have generally risen over time. However, from 1995 they show much sharper movements reflecting global events. Figure 2 shows the FTSE 100 index, the most widely used UK stock market indicator, from 1984 to 2012. The first sharp rise in the FTSE 100 between 1996 and 1999 was during the ‘dot-com bubble’. When the speculative bubble burst the FTSE 100 index fell over the period 2000 to 2003 by around 50%. After this event, the UK stock market increased until the financial crisis began in late 2007. Subsequently, the FTSE 100 index fell by around 40% before recovering again. The two events of the dot-com bubble and the financial crisis have also meant that the FTSE indices have shown less of an upward trend since 1995.

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4. CREST / Multiple ownership

The main source of the data on share ownership is CREST, the electronic settlement system for equity share trading managed by Euroclear. Nearly 90% of all UK shares are recorded on CREST; the remaining shares are still held in certificated form outside the system. Each registered participant in CREST has to specify to which National Accounts category the beneficial owner of the shares belongs (these categories are listed in Table A in the Background Notes and described in more detail at Annex B) and this information can be used to generate the breakdown by sector.

However, the beneficial owners of shares are not necessarily the same as the registered owners. In particular, since the dematerialisation of shares in 1996 there has been a growing trend towards investors using pooled nominee accounts, accounts where the beneficial owners are from two or more of the National Accounts categories.

At the end of 2012, 59.4% of the total value of UK shares was held by multiple ownership pooled nominees and a further 10.4% was held in certificated form. In order to identify the true beneficiary for these holdings, further analysis was conducted by Equiniti and Orient Capital (updating previous work by Equiniti for the 2010 results). The estimates for 2012 incorporate the results of this analysis. See the methods section of the Background Notes for further details on the use of CREST and the analysis of the multiple ownership category.

A number of improvements have been made to the methodology for the 2012 survey. These improvements resulted in discontinuities between the estimates for 2012 and the data published for 2010 - the estimates were not initially directly comparable, in the sense that changes between the two years could not be attributed to changes in share ownership in the real world. The earlier work was therefore revisited with the aim of making the analysis for 2010 more comparable. This has resulted in some revisions to the data for 2010. However, it is possible that the revised 2010 data are not fully on the same basis as the 2012 data. In particular, movements in the rest of the world and other financial institutions data between 2010 and 2012 may in part be due to changes in methodology.

Table 2 below provides a comparison of the data originally published for 2010 and the revised data published elsewhere in this Bulletin. The revisions effectively amount to a reallocation of part of the other financial institutions holdings to unit trusts, the rest of the world and pension funds. In addition to these revisions, estimates for individuals have been revised down to bring the methodology for allocating the certificated holdings into line with the methodology used for the 2012 estimates.

Figure 3: Revisions to 2010 data

Figure 3: Revisions to 2010 data

Source: Office for National Statistics
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5. Rest of the world holdings of UK shares

The proportion of UK quoted shares (in terms of value) owned by rest of the world investors has increased substantially since 1963 (See Figure 3 and Table A). By 1998, holdings had increased to 30.7%. There have continued to be increases in recent years, with holdings now at a record 53.2%. The large increases since 1994 partly reflect the growth in international mergers and acquisitions, and the ease of overseas residents to invest in UK shares.

Note that between 1998 and 2008, it was assumed that 20% of the value of shares held by multiple ownership pooled nominee accounts would have underlying ownership by the rest of the world. This was based on analysis of share registers in 1997. An exercise to update the sector allocations in 2010 showed that 57.7% of these holdings were owned by the rest of the world sector. This had a large impact on the results for 2010, given that over 40% of UK quoted shares were held in pooled accounts. Consequently, comparisons in the intermediate years between 1997 and 2010 should be made with caution. It should also be noted, as mentioned earlier in the section on CREST/Multiple ownership, that the growth in the rest of the world data between 2010 and 2012 may in part be due to changes in methodology.

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6. Insurance Companies holdings of UK shares by value

The proportion of shares held by insurance companies (Figure 4 and Table A) grew from 10.0% in 1963 to a high of 23.6% in 1997. Since this time, insurance companies’ holdings have fallen, reaching 6.2% in 2012. This is the lowest recorded percentage of holdings by insurance companies. The fall could reflect insurance companies switching from UK equities to alternative investments.

Note that between 1998 and 2008, it was assumed that 20% of the value of shares held by multiple ownership pooled nominee accounts would have underlying ownership by insurance companies. This was based on analysis of share registers in 1997. An exercise to update the sector allocations in 2010 suggested that only 4.0% of these holdings were owned by insurance companies. This had a large impact on the results for 2010, given that over 40% of UK quoted shares were held in pooled accounts. Consequently, comparisons in the intermediate years between 1997 and 2010 should be made with caution.

The ONS statistical bulletin MQ5: Investment by Insurance Companies, Pension Funds and Trusts also reports investment in UK quoted shares by insurance companies. The numbers can sometimes differ significantly from the figures reported here. The difference could in part be attributed to funds and other investment instruments run by insurance companies, which the 2012 share ownership categorises as other financial institutions. In addition, the analysis of share registers to identify the true ownership of pooled nominee accounts classifies pension funds run by insurance companies as pension funds.

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7. Pension funds holdings of UK shares by value

The proportion of shares held by pension funds (Figure 5 and Table A) grew from 10.0% in 1963 to a high of 32.4 in 1992. Since this time, pension funds’ holdings have fallen, reaching 4.7% in 2012. This is the lowest recorded percentage of holdings by pension funds. The fall could reflect fund managers broadening their portfolios to seek higher returns and to spread risk.

Note that between 1998 and 2008, it was assumed that 50% of the value of shares held by multiple ownership pooled nominee accounts would have underlying ownership by pension funds. This was based on analysis of share registers in 1997. An exercise to update the sector allocations in 2010 suggested that only 7.8% of these holdings were owned by pension funds. This had a large impact on the results for 2010, given that over 40% of UK quoted shares were held in pooled accounts. Consequently, comparisons in the intermediate years between 1997 and 2010 should be made with caution.

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8. Individuals holdings of UK shares by value

The proportion of shares held by individuals (Figure 6 and Table A) has declined since 1963 when individuals owned 54.0% of UK quoted shares in terms of total value. Their percentage holdings reached a record low of 10.2% in 2010 but picked up slightly to 10.7% in 2012.

Note that between 1998 and 2008, it was assumed that 1% of the value of shares held by multiple ownership pooled nominee accounts would have underlying ownership by individuals. This was based on analysis of share registers in 1997. An exercise to update the sector allocations in 2010 suggested that 5.5% of these holdings were owned by individuals. This had a large impact on the results for 2010, given that over 40% of UK quoted shares were held in pooled accounts. Consequently, comparisons in the intermediate years between 1997 and 2010 should be made with caution.

Included in individual ownership are shares owned by company directors and those in privatised and demutualised building societies, which are still owned by individuals. Many individuals also make investments in ordinary shares through unit trusts. However, holdings via unit trusts that are not quoted companies are not included.

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9. Unit trusts' holdings of UK shares by value

Unit trust holdings were relatively low and declining through the latter part of the 1990s (Figure 7 and Table A) but have increased in recent years, to 8.8% in 2010 and 9.6% in 2012.

Note that between 1998 and 2008, it was assumed that 3% of the value of shares held by multiple ownership pooled nominee accounts would have underlying ownership by unit trusts. This was based on analysis of share registers in 1997. An exercise to update the sector allocations in 2010 suggested that 13.2% of these holdings were owned by unit trusts. This had a large impact on the results for 2010, given that over 40% of UK quoted shares were held in pooled accounts. Consequently, comparisons in the intermediate years between 1997 and 2010 should be made with caution.

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10. Other financial institutions' holdings of UK shares by value

In the 1990s, other financial institutions held a relatively small percentage of UK quoted shares by value (Figure 8 and Table A). The holdings continued to increase throughout the last decade, reaching a peak of 12.3% in 2010, but they fell to 6.6% in 2012.

Note that between 1998 and 2008, it was assumed that 3% of the value of shares held by multiple ownership pooled nominee accounts would have underlying ownership by other financial institutions. This was based on analysis of share registers in 1997. An exercise to update the sector allocations in 2010 suggested that 9.9% of the holdings were owned by other financial institutions. This had a large impact on the results for 2010, given that over 40% of UK quoted shares were held in pooled accounts. Consequently, comparisons in the intermediate years between 1997 and 2010 should be made with caution. It should be noted, as mentioned earlier in the section on CREST/Multiple ownership, that the fall in the other financial institutions data between 2010 and 2012 may in part be due to changes in methodology.

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11. Government intervention in financial institutions

The financial crisis of 2008 led to unprecedented government intervention in the UK financial industry.

There was initial recapitalisation of The Royal Bank of Scotland Group plc (RBS) in November 2008 with a further injection in 2009. The recapitalisations of LloydsTSB Group plc and HBOS plc took place in 2009. Government also participated in two subsequent recapitalisations of Lloyds Banking Group plc in 2009. On 31 December 2012, these interventions equated to shareholdings valued at £42.6 billion. For further information of the treatment of government interventions see the ONS article Public Sector interventions in the Financial Crisis.

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12. Shares held in FTSE100 companies

The sample for the 2012 share ownership included most companies in the FTSE 100 at 31 December 2012. An analysis of the holdings in these companies has been carried out and used to derive estimates for all FTSE 100 companies. FTSE 100 companies comprised 85.1% of the total value of the stock market at the end of 2012.

Figure 9 and Table 9 show, as a percentage, the value of funds invested by each beneficial holder split between the FTSE 100 and smaller companies at 31 December 2012. 71.6% of individuals’ holdings by value were with FTSE100 companies with the remaining 28.4% in other companies. The UK individuals’ holdings in other quoted companies was higher than average because this includes paper holdings by company directors. 87.2% of the rest of the world shareholdings in UK quoted companies were with FTSE100 companies. Overseas investors were likely to be attracted to the biggest companies, many of which have an international presence.

Private non-financial corporations (PNFCs) include shares held in treasury by some of the largest PNFCs where they buyback their own shares in order to subsequently either distribute to employees or cancel them. This is why 99.5% of the shares held by PNFCs, in terms of value, were within the FTSE 100.

Nearly 100% of public sector holdings are with FTSE 100 companies. This is due to the government interventions in Lloyds Banking Group and Royal Bank of Scotland group, the value of which dwarf any other central government, local government or public corporation share holdings.

Estimates of the shareholdings by industry of issuing company are provided in Table C.

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13. Geographic analysis of Rest of the World holdings of UK shares

On 31 December 2012, the value of all UK quoted ordinary shares was £1,756.3 billion. Of this, the rest of the world held 53.2% (£935.1 billion).

Table 3 below shows the percentage breakdown of the total rest of the world shareholdings in UK shares by value. The analysis here is based on work by Equiniti and Orient Capital on both the pooled and non-pooled accounts in the sample.

North America held 48.3% of the total £935.1 billion rest of the world holdings of UK shares. North American investors increasingly invest directly in the ordinary shares of UK companies listed on the London Stock Exchange. Several UK companies also have American Depositary Receipt (ADR) programmes established for North American investors to trade foreign shares and receive paid dividends in US dollars.

European holdings of UK shares at 31 December 2012 stood at 25.8%. Asian holdings of UK shares were 10.1%.

Figure 10: Geographic Analysis - Rest of the World by Region

% Breakdown

Figure 10: Geographic Analysis - Rest of the World by Region

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14. Sector analysis of Rest of the World holdings of UK shares

In previous publications, the regional breakdown shown in the previous section was the only analysis provided of shareholdings outside of the UK. Table 4 below is a new table showing the percentage breakdown of the rest of the world shareholdings by sector. Again, this analysis is based on work by Equiniti and Orient Capital on both the pooled and non-pooled accounts in the sample.

Unit trusts holdings stood at 34.4%, followed by other financial institutions and pension funds, with holdings at 22.6% and 18.0% respectively.

Figure 11: Geographical Analysis - Rest of the World by Beneficial Owner

% Breakdown

Figure 11: Geographical Analysis - Rest of the World by Beneficial Owner

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Contact details for this Statistical bulletin

Harry Duff
share.ownership@ons.gov.uk
Telephone: +44 (0)1633 456771