Over the next few decades, demand is set to slowly leak away
Even Britain’s sovereign-debt, or “gilt”, market has settled down. Just months ago aby Kwasi Kwarteng, then chancellor of the exchequer, threatened it with catastrophe. But under Jeremy Hunt, Mr Kwarteng’s more competent and responsible successor, a repeat seems out of the question. As Mr Hunt prepares to unveil a new budget on March 15th, government borrowing is set to be £30bn lower this fiscal year than forecast in November.
shrivel compared with those in the rest of the world, from accounting for 13% of global equity value to just 4%. Initial-public offerings , though thin on the ground everywhere during last year’s market crash, were nearly unheard of in the City. Less than 1% of the capital raised through globalMeanwhile, barely a month has gone by without another250 firm deciding to leave London’s bourse. Recent examples include Aveva, Avast, HomeServe, Micro Focus and Ultra Electronics.
This vicious circle was kicked into motion by the gradual disappearance of a key buyer of domestic stocks. Defined-benefit pension schemes, today worth £1.5trn, have gone from having around a quarter of their assets invested in London-listed shares in 2008 to less than 2% in 2022.A combination of regulatory incentives and theschemes’ increasing maturity drove them away from the risk and growth potential of stocks and towards the safety of bonds.
To make matters worse, an even bigger buyer of gilts is departing at the same time. Through successive waves of quantitative easing, or large-scale purchases of government bonds with newly created money, the Bank of England has amassed an enormous portfolio of gilts. Now it, too, is in exit mode. The bank began selling its holdings in November, aiming to reduce them by £80bn per year.
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