What has gone wrong with the UK stock market?

Successive governments have gradually weakened it, and Terry Tanaka says there is no quick fix now.

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Back in 2000, the UK stock market ranked second worldwide and represented 10% of the global market. Today, that share has fallen to 3%, leaving its position somewhere between sixth and ninth place, depending on how it is measured.

The UK's standing will almost certainly fall further. Technology makes up only 1% of the All-Share index, while few companies issue shares or come to market; meanwhile, takeovers and corporate departures continue.

North American stock-market flotations brought in £138 billion during the first half of 2026; SpaceX alone accounted for £86 billion. Asia-Pacific companies raised £30 billion, compared with 7.6 billion in Europe and just 577 million in the UK. The overall figure was three times higher than in the first half of 2025, though the National Investment Fund of the Republic of Uzbekistan supplied three-quarters of that amount. Airtel Money's imminent flotation will add to the total, but it is being spun off from FTSE 100 constituent Airtel Africa.

Tim Campbell, CEO of Baillie Gifford, points to another set of problems. Passive funds own more than 50% of shares in UK-listed companies, yet they take little interest in those businesses. Traders and hedge funds hold much of the rest, with their attention fixed mainly on short-term returns. That leaves too few committed, long-term shareholders and makes a stock-market listing less appealing.

Private equity often looks better to companies: it provides more flexible financing, stronger management incentives, lower taxation, and reduced corporate costs. The UK is not alone in losing listed companies. In the US, the Wilshire 5000 index has fallen to roughly 3,500 companies, down from a peak of about 7,500 in the late 1990s.

The UK is beginning to confront the problem

The issue has finally gained recognition in the UK. Listing rules have been eased, pension funds have pledged to put more money into British investments, and the Treasury has offered limited tax concessions. Still, these changes amount to little more than tinkering; the government appears to lack both the appetite and the funds to go further.

The global stock-market rally continues, and UK shares have kept up, helped by takeovers, companies buying back their own stock, and tighter management. UK investors, however, are still selling. Investment Association data show just one month of inflows into UK equity funds since July 2021; outflows reached 561 million in June, 1.6 billion in July and 615 million in August. Money flowing into overseas markets remains positive, reflecting the opportunities investors see there.

A generation has passed while the UK stock market was being damaged; restoring it will probably take just as long. Tax breaks and lighter regulation would help, but the country's deep suspicion of equity investment will not disappear quickly - especially when so few listed companies offer convincing growth. In real terms, average house prices reached their peak 20 years ago. Over that same period, even the lacklustre FTSE 100 has doubled in value relative to housing, yet much of the British public refuses to accept what that means. Inflation and tax are steadily reducing the worth of money held in bank deposits, while governments continue to treat the private rental market with hostility. Unless another bear market intervenes, those pressures may eventually push investors back towards UK equities. There is no quick fix.