British investors have abandoned UK equity markets. Such neglect has pushed valuations to exceptionally cheap levels, with UK companies undervalued relative to the US and the rest of Europe on just about every measure.
The scale of undervaluation could offer attractive opportunities for long-term investors. In 2015, the UK forward-looking price/earnings ratio was higher than European markets and around 10% lower than the US. Now, UK equities are over 40% cheaper than the US on this measure and more than 20% cheaper than Europe.
So, what has happened? While post-Brexit political, economic and pandemic dislocations have played a part, the loss of our once-strong domestic investor support has been a major factor too.
This is a loss to our economy and future growth. Restoring domestic investor support must be a government priority
Private equity and overseas investors are snapping up successful British firms cheaply, share buybacks…
