The proportion of London-listed shares held by overseas investors increased again to a record high of 57.7% of the value of the UK stock market at the end of 2022, according to latest data from the UK’s Office for National Statistics (ONS).

This is a record high, up from 56.3% in 2020.

The proportion of UK shares held by UK-resident individuals fell to 10.8%, down by 1.2 percentage points from 2020.

The data showed that shares in quoted UK-domiciled companies listed on the London Stock Exchange (LSE) were worth a total of £2.42 trillion at th end of 2022.

The data revealed that insurance and pension funds’ proportions in UK quoted shares have fallen dramatically since 1997 when the two sectors held a combined 45.7% of UK quoted shares.

The two sectors held a total of 4.2% of UK listed shares in 2022 — the lowest proportion jointly held by them on record.

“This downward trend may be caused by several factors, such as companies expecting more profitable returns on overseas shares as well as changes in pension fund regulations,” said the ONS.

“One significant change in regulation was the introduction of Financial Reporting Standard 17 (FRS17) in the year 2000.

“This accounting standard required companies to calculate the surplus or deficit on their defined-benefit pension schemes each year and disclose any deficit as a financial liability in their accounts.

“This may have caused company pension funds to make lower risk investments in products such as corporate and government bonds, moving away from UK quoted shares.

“According to the Pension Protection Fund, the UK defined benefit pensions system has significantly reduced its holdings of UK quoted shares since 2008.

“Balance sheet estimates as reported by the ONS bulletin MQ5: Investment by Insurance Companies, Pension Funds and Trusts: Quarter 3 (July to Sept) 2016 at the end of 2015 showed that the value of overseas shares held by insurance companies and pension funds exceeded the value of UK shares.

‘This trend was seen for the first time in 2011 (this time series started in 1964).

“Moreover, between 2020 and 2022 further estimates from the ONS Financial Survey of Pension Schemes show that trust-based pension fund direct investment in UK equities is lower relative to direct investment in US equities (UK £8 billion less as of 31 December 2022).”

Beneficiaries in the US held the largest proportion of UK quoted shares of any country outside of the UK, standing at £626.1 billion in 2022.

For comparison, this was over half the value of UK quoted shares owned domestically, which was just over £1 trillion.

Beneficiaries in the Netherlands held the largest proportion of UK quoted shares of any European country outside of the UK, standing at £99 billion in 2022.