Just 8% of UK retail wealth is invested in equities and mutual funds, the lowest level in the G7, according to an abrdn report.
Instead, UK adults hold an average of 50% of their wealth in property and 15% in cash.
In comparison, US retail investors hold almost four times the amount (33%) in equities and mutual funds (outside of pensions), and just 26% in property.
With UK adults holding some £14trn in total assets, abrdn has urged the government to take action to address the UK’s risk culture and boost capital markets.
The firm’s analysis suggests that if UK adults raised their participation in investments to US levels, it could unlock up to £3.5tn for capital markets.
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James McCann, deputy chief economist at abrdn, said: “Investing culture is a very real part of American life. As an economist who has lived and worked in both the UK and the US, I have seen first-hand the stark differences in attitudes between the two countries around participating in financial markets.
“Equity ownership is more common in the US, where households hold a much greater share of their wealth in stocks and shares compared to their UK peers.
“Culturally, there is a greater focus on using financial markets to build financial independence in the US. I have been particularly struck by the prominence of the FIRE movement – Financial Independence Retire Early.”
Xavier Meyer, CEO Investments at abrdn, added that the UK is “streets behind many other developed countries” in terms of retail participation.
“Establishing a national culture of long-term share ownership will be crucial if we want to ensure healthy capital markets and shore up individuals’ long-term savings. We need a virtuous circle of good regulation, good products and both institutional and retail participation.
“Getting the UK investing is a critical challenge for society and, as an asset manager and investment platform owner, we aim to be part of the solution.”
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Meanwhile, interactive investor CEO and abrdn COO Richard Wilson believes that scrapping stamp duty on UK shares could provide a “big bang moment” to encourage more of the population to engage with the stockmarket.
“If stamp duty wasn’t a barrier to investing, why is it that we are losing systematically to the markets that don’t apply it?
“Sweden, famed for its personal investing culture, applied a Financial Transaction (FTT) Tax of 0.5% between 1984 – 1991. Having removed FTT, the market has grown and the burgeoning activity in Swedish capital markets is enough to make the rest of Europe blush, if figures compiled by New Financial earlier this year are anything to go by.”
This story was written by our sister title, Portfolio Adviser
