Recent developments at the London Stock Exchange have brought some encouraging news beyond the robust performance of the FTSE 100 index, which has impressively climbed over 17 percent this year despite widespread concerns about a potential October downturn.

The spotlight, however, is on the notable market debuts of Shawbrook, a niche banking entity that commenced trading on Thursday, and Princes Group, known for its canned tuna products, which joined the exchange on Friday. These join The Beauty Tech Group, which made its entrance last month.

Although this marks a modest resurgence, the number of new stock listings remains a fraction of historical figures. This year has seen only a handful of initial public offerings compared to the 339 in 2005 and 300 in 2006. Even after the financial meltdown, annual listings typically ranged from 50 to 100 until 2022.

Given that London has fallen out of the top 20 global financial hubs for IPOs, a revival, however small, is a welcome sign. This isn’t just a matter for the financial sector to ponder; it holds broader significance for the British public.

Is this an indication that there is a growing interest among Britons in channeling their savings into stocks rather than keeping them dormant in bank accounts?

Historically, over extended periods, equities have consistently delivered substantially better returns compared to bonds and cash holdings.

New era: Apps make it easy to invest and to see how well those investments are doing

The UBS Global Returns Yearbook shows that since 1900 US equities have given an overall real return – so after inflation – of 6.6 per cent a year, against 1.6 per cent for bonds and 0.5 per cent for bills (a proxy for cash). For the UK the numbers are 5.4 per cent, 1.4 per cent and 1.0 per cent.

The outperformance of equities is so overwhelming that it is hard to see why anyone should hold bonds or cash at all, except perhaps to keep some funds aside for unexpected emergencies.

This is the main reason why I believe the Chancellor would be right to cut the amount people can put into cash ISAs (Individual Savings Accounts) in the Budget, as long as she increases what they can save in equities.

This is a deeply unfashionable view, but I am convinced that it is absolutely in everyone’s self-interest that they should save long-term by buying shares rather than bonds, or simply getting interest on a bank account.

After all, the precursor of ISAs were Peps, personal equity plans, introduced by Nigel Lawson in his Budget in 1986 as a way of encouraging individuals to invest in shares by making capital gains and dividends tax-free.

Peps were replaced by ISAs in 1999, when they were bundled in with another savings scheme, Tax-Exempt Special Savings Accounts, or TESSAS. 

So gradually the original rationale for encouraging people to build an equity portfolio in a tax-efficient way was undermined.

We have Revenue & Customs data only from 2022 but then there were 4,850 ISA equity millionaires. There will be a lot more now, given what has happened to the market since then. By contrast, the most a cash ISA saver could have accumulated, putting in the maximum every year since 1999, would be less than £300,000.

There is, however, an issue. Most of those ISA millionaires developed their investment habit long ago. Their average age is 72 to 74. So what will happen next? Here there are rays of light. There is evidence that shareholders generally are more active.

A few days ago the Association of Investment Companies reported that nearly half of self-directed private investors in investment trusts said they used their shares to vote, up from 38 per cent two years ago.

Attendance at annual meetings, though still very low, has crept up, with young investors the most likely to go to the meetings, either online or in person.

And globally a World Economic Forum survey of 13 countries this year found that 30 per cent of Gen Z started investing in university or early adulthood, the highest proportion of any age group.

My own feeling is that we are in the early stages of a revival of equity culture, driven in part by the market boom but equally by the apps that make it easy to invest and to see how well those investments are doing. I hope I’m right, because if I am, this could be the start of something big.

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