Fewer than 12 per cent of UK shares are now owned by individuals, according to the latest projection from Capita Registrars, which runs share registers for 100 of the top 350 companies.

Let us hope that Capita missed some, because this would represent a further step down from the 14 per cent-plus consistently recorded by National Statistics between 2001 and 2004. In 1986, which came between two official counts, private investors probably owned about a quarter of all listed shares directly. So the City’s Big Bang, the 20th anniversary of which has been celebrated with much nostalgia this week, seems to have done little to stem the long decline of private influence in stock markets. Only a further 20 years back, individuals owned more than half the shares listed on UK stock exchanges.

This simplistic view, held throughout the City of London, is wildly exaggerated. At the time of Big Bang, the proportion of shares held by pension funds was edging towards its zenith, reached at more than 32 per cent in 1992. Less than 15 years later that has halved to 15 per cent or less as funds continue to ditch equities like impoverished aristocrats flogging the family silver.

Private investors are neck and neck with UK pension funds and marginally behind insurance companies in importance as owners. An array of foreign holders now make up the biggest group, many of them offshore hedge funds.

Companies as well as specialist brokers and those in the custody business should therefore court private investors and put as much emphasis on their interests as those of UK pension funds. Yet companies and the City treat pension funds as if they were still the main buyers of shares, not the main sellers. Most ignore private investors, who are more loyal than the others and more active than they once were.

Big Bang initially affected private investors mainly through the accompanying Financial Services Act, which sharpened up investor protection. Brokers were obliged to deal at the best prices available, as good brokers had always done, and to pay attention to the investor’s individual needs when giving advice, though the rogues eventually resurfaced offshore.

At the start, however, commissions and charges remained the same or even went up for small investors, reflecting the higher relative cost of small transactions. Only with the later agency of technology, notably internet broking, did private shareholders gain the real benefits of price competition and the abolishment of fixed commissions.

Before Big Bang, having your own stockbroker was like having your own accountant and solicitor, alien to most families not born to such things. So most small investors dealt through their banks, as rarely as possible. Today you do not have to be rich or a day trader to have a choice of internet broker, improved bank services or the private-client broker, who offers advice, ideas and a real person you know at the end of the phone, at much higher commission cost.

The drawback of new technology is that shareholders are bombarded by a continuous stream of nuisance offshore e-mails and irritatingly persistent cold calls — all of which should be ignored.

If reform of broking has made investment more saver-friendly, however, more have been put off by the virtual abolition of public share offers and the whittling away of rights issues. These were indirect effects of Big Bang, through the import of American practices that now dominate. The Alternative Investment Market aside, Euronext and the Deutsche Börse now seem to offer better opportunities for interesting new issues than the London Stock Exchange.

The bookbuilding system now used for new issues may suit private equity houses desperate to sell at the highest price and institutional placings also suit investment banks. But shutting out private investors is distorting and stultifying the market. Going public is now seen as an expensive road to instability for growing British businesses. Outside the hope-value sectors, such as dot-coms, minerals exploration and biotechnology, it is suitable mainly for Russian companies whose bosses retain most of the stock.

Investment banks have no interest in changing this. They prefer frenetic trading with hedge funds, or between themselves, to any more stable form of ownership. Companies need to get their act together if they are to mobilise new technology to create a modern form of public share offer and rebuild a real relationship with real investors. The next Big Bang reform should aim to bring back the public.

graham.searjeant@thetimes.co.uk

For more investment articles visit www.timesonline.co.uk/invest

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