UK shares − but who holds them?
Shares listed on the London Stock Exchange are an increasingly popular choice for overseas investors. In the 1960s only around 7% of UK shares were in international hands, but today that figure stands at 53%, according to recent estimates from the Office for National Statistics (ONS).
Of the foreign-held total, North America boasts the largest appetite, with a little under half of the total and that figure rises to three-quarters when we include our neighbours in Europe. Collective investments such as unit trusts, pension funds and exchange-traded funds account for 75% of all foreign demand, with another 10% traced to foreign state ownership.
If the revelation that over half of UK listed shares are foreign-owned comes as a shock, consider this: Britain receives more investment income each year than it pays out. That’s a more interesting statistic than it might appear at first sight. One of the many reasons London-listed shares are attractive to foreign investors is the relatively high dividend yield − compare a 3.3% yield in the UK to 2.1% in the US and 1.7% in Japan. Britain’s positive net investment income position is a symptom of our own voracious appetite for foreign assets. A study last year by the ONS revealed a recent surplus of at least £251 billion of direct investment.
Actually, these figures describe a vibrant role for Britain as a protagonist, rather than foil, in the market for global investment. Indeed, London lies right at the heart of that market. For that matter, and for that reason, it is not just British companies that are keen to have a London listing − there’s nothing quintessentially British about SABMiller, Old Mutual and Petrofac to name just a few.
Treasury moots ISA cap of £100k and cuts to pension tax-free cash
A £100,000 cap on savings ISAs has been proposed by the Treasury after it consulted with financial services firms. The Treasury is also thought to be considering reducing the amount of pension tax-free cash.
While ‘ISA millionaires’ represent a very small proportion of the total number of ISA savers, The Sunday Telegraph has suggested that the proportion of those with £100,000 or more in ISAs is about 2% of investment ISA holders. The current annual ISA limit is £11,520 for 2013/14, half of which can be held in cash and half in investments.
The Treasury is also said to be looking at reducing the amount that can be taken from a pension pot at age 55. Options discussed include reducing the tax-free lump sum from 25% to 20%, while another suggestion is to cap the total amount that can be withdrawn at age 55.
Prime Minister launches Islamic index and bonds
Prime Minister David Cameron has announced that the UK will issue an Islamic bond
(“sukuk”), making the UK the first non-Muslim country to do so.
Mr Cameron announced the plans as part of the World Islamic Economic Forum in London. The sukuk is worth £200 million and is scheduled for issue as early as 2014.
Islamic bonds bring in a fixed return via a tangible asset or service without charging interest, as no interest on business dealings may be charged in accordance with Islamic principles. Other Islamic financial rules detail that all transactions must be founded on a real trade or business activity, and may not involve anything forbidden by Sharia law, including gambling or alcohol.
It is also likely that a new Islamic index will be launched on the London Stock Exchange. Islamic investments have increased by 150% in the last seven years, with an estimated value of £1.3 trillion forecast by next year.