Uk Investors: Who And How Many?

The UK offers a robust, business-friendly environment for investors, with a large consumer market, a liberal economy, world-class talent, and a favourable regulatory environment. However, only about 23% of people in the UK have invested in the stock market, compared to around 61% in the US. This disparity is attributed to various factors, including a risk-averse culture, financial barriers, and a lack of confidence among UK investors. While the UK market has been performing well, it is still considered undervalued and unloved by many investors.

UK stock market participation statistics

There are several factors contributing to the low participation rate in the UK stock market. One of the primary barriers is a risk-averse attitude and a fear of losing money. Many British people prefer to keep their savings in cash, despite the low returns and the eroding effect of inflation. This is reflected in the approximately £1.8 trillion of cash sitting in UK savings accounts as of 2023. Additionally, a survey by Scottish Friendly found that 49% of respondents cited the fear of losing money as a reason for not investing, and 29% said they preferred cash because "it is what they have always done".

Another factor influencing stock market participation is income level. Households with higher incomes are more likely to invest in shares. In 2021-2022, 26% of families with a weekly income of £2,000 or more owned stocks, compared to just 7% of households with a weekly income of £200 or less. This disparity is further highlighted when comparing generations, with only 1% of Gen Zers owning stocks, while ownership rates climb to 12% for those aged 75 and above.

There is also a notable gender investment gap in the UK. According to the Family Resources Survey, Gallup, and Kantar, 9% of males reported investing in shares, compared to just 6% of females. This gap can be attributed in part to a confidence gap between men and women, with a third of women and a quarter of men feeling confident when it comes to investing.

While the UK's stock market participation rate is low, there are signs of increasing interest. The number of people with more than £10,000 in investable cash who are willing to take on investment risk has grown. Additionally, the amount subscribed into stocks and shares increased by 40% in 2020-2021 compared to the previous year, indicating a potential shift in attitudes towards investing in the UK stock market.

UK investor behaviour statistics

The UK has seen a decline in the number of people investing in shares, with only about 8% of the population owning stocks and shares. This is a decrease from the pre-pandemic figure of 10% in 2019-2020. In contrast, 61% of Americans invest in the stock market, which is consistent with the historical average since 1998.

A survey by Scottish Friendly found that many UK residents are suffering from "investophobia", with 49% of respondents citing the fear of losing money as a reason for not investing in the stock market. This is despite 66% of savers being aware that interest rates were below inflation rates, and over half acknowledging that inflation would reduce their money's value in real terms.

According to the Financial Conduct Authority (FCA), in 2022, there were approximately 9.7 million UK citizens with over £10,000 in investable cash, mostly accumulated during the pandemic. However, only 4 million are willing to take on investment risk. This suggests that many people in the UK are hesitant to invest their money, even when it could result in better returns during inflationary times.

A survey by HSBC revealed the top barriers to investing in the UK. 45% of respondents cited a lack of money as the primary reason, followed by concerns about access to funds (37%), a dynamic financial situation (30%), lack of investment knowledge (23%), and fear of losing money (21%).

The UK's retail investing share is among the lowest in Europe, with non-professional investors controlling only about 23% of the country's assets under management as of 2022. This hesitancy to invest has implications for individuals, communities, and the broader distribution of wealth in the UK.

UK investors in shares demographics

UK investors in shares statistics reveal a variety of demographic trends. Here is an overview:

Gender

There is a notable gender investment gap, with men investing significantly more than women. In the UK, 9% of males reported investing in shares, compared to just 6% of females. This disparity is influenced by a confidence gap, with a third of females feeling confident when investing, compared to a quarter of their male counterparts.

Age

Older generations are more likely to invest in shares, with the Silent Generation (aged 75+) being the most active, at 12%. In contrast, younger generations, particularly Gen Z, exhibit lower investment rates, with only 1% owning stocks. However, Gen Z is the most keen on investing, with 68% having invested before, surpassing millennials at 65%.

Income

There is a strong correlation between household income and investment behaviour. Families earning £2,000 weekly are 3.7 times more likely to invest in shares than those with a weekly income of £200 or less, who have an investment rate of just 7%.

Region

London has the highest number of investors, with 72% having invested. Other regions with high investment rates include the North East (54%) and Northern Ireland (52%). Wales and Scotland have the lowest investment rates, both at 43%.

Education and Family Influence

Education and family influence also play a role in investment decisions. Individuals with higher education levels and those whose parents invested are more likely to invest. 48% of Gen Z investors have parents who invested, compared to 28% of non-investors. Additionally, 64% of Gen Z investors discussed investments with their parents, while only 39% of non-investors did so.

Barriers to investing

Fear is a common emotion that prevents people from investing, as they are afraid of losing money or making poor investment decisions. This fear can be addressed by providing financial education and exposing individuals to successful investing strategies and individuals who have benefited from the stock market.

Lack of knowledge is another barrier, as many people feel they lack the financial acumen or expertise to invest effectively. This can be mitigated by seeking advice from wealth managers or robo-advisors, who can provide guidance based on an individual's personal goals and risk tolerance.

Insufficient funds can also hinder people from investing, especially those living paycheck-to-paycheck or with limited savings. To overcome this, individuals can start investing with small amounts of money and set investment goals. Additionally, investing in a diversified portfolio can help minimize risk and increase the potential for long-term growth.

Financial constraints, such as high management costs and trading fees, can be a significant barrier, especially for smaller investors. The development of robo-advisors and the impact of technology have helped reduce these costs in recent years, making investing more accessible and affordable.

Other barriers to investing in the UK include economic uncertainty, strict collateral requirements, and complex procedures for trading and investing abroad. Addressing these barriers can help improve financial inclusion and provide more opportunities for individuals to grow their wealth.

UK vs US investing

Overview

US companies dominate the global stock market, comprising almost 75% of the MSCI World Index, while the UK's presence in the same index is only about 4%. The US market also hosts some of the world's largest and most well-known businesses, such as Amazon, Apple, Meta, and Microsoft. As a result, US stocks are worth considering for UK investors looking to add diversity to their portfolios.

Advantages of Investing in the US

• Market size and liquidity: The New York Stock Exchange (NYSE) and the Nasdaq have a combined market capitalisation of around $51 trillion, making them the most valuable stock markets in the world. This provides investors with exposure to some of the largest businesses across various sectors.
• Diversification: The sheer size of the US stock market allows for easy diversification across sectors and companies, helping to manage risk and smooth returns.
• Currency stability: The US dollar's dominance as the world's reserve currency provides stability and can offer a hedge against other currencies.
• Performance: In recent years, US equities have outperformed global markets, resulting in higher valuations. This is driven by mega-cap technology businesses like Alphabet, Amazon, Apple, and Microsoft.
• Convenience: Many large European and Asian companies also list their shares on US markets, providing a convenient route for UK investors to access these companies.
• Sector exposure: The US market has a strong skew towards technology and online businesses, particularly in the communication services and consumer discretionary sectors.
• Trading opportunities: The possibility of 24/7 trading, as the NYSE is considering an application for the first-ever 24/7 bourse.

Disadvantages of Investing in the US

• Currency risk: Currency fluctuations between the pound and the dollar can impact investment returns.
• Taxes and fees: There may be additional costs when investing in US stocks, including higher trading or administrative fees, currency conversion fees, and tax implications. US stocks are often priced higher than UK stocks, making it more challenging to invest smaller sums.
• Time zones: The time difference between the UK and the US East Coast (usually 5 hours) must be considered when trading, especially regarding market opening and closing times.
• Information availability: US companies typically release their results shortly after the market closes for the day, unlike UK companies, which usually announce results in the morning. US companies also release quarterly results instead of the twice-yearly practice common in the UK.
• Volatility: Trading during extended hours, which includes pre-market and after-hours trading, can be extremely volatile due to lower trading volumes.

While investing in the US offers UK investors access to some of the world's largest companies and diverse sectors, it also comes with additional risks and considerations, such as currency fluctuations and time zone differences. UK investors should carefully weigh the advantages and disadvantages before adding US stocks to their portfolios.

Frequently asked questions