More than 20 years ago, in 2003, nearly a quarter of UK households directly owned shares.

To take you back, the FTSE 100 index reached a low point in March 2003, coinciding with the start of the Iraq war. Inflation stood at 2.9%.

Fast forward to now. Geopolitical turbulence, like then, is challenging. Global equities remain volatile, as we have seen with various financial downturns over the years, most prominently in 2008 and the 2020 Covid-19 crisis. Inflation sits at 2.6%.

But one area has gone backwards: the number of UK households who directly own shares has slumped to 11%.

In recent weeks, the UK’s City minister has issued a call to arms and said the government is determined to “boost the UK’s investment culture”. Meanwhile, the Financial Conduct Authority is finalising its own views on how to generate an “advice revolution,” with its imminent advice-guidance boundary review.

That ambition is welcome. The consequences of this investment gap for individuals, and for UK growth, are substantial. While past performance is by no means an indication of future performance, nor are market movements ever linear, if you had invested £100 in the FTSE All Share in 2004, your gross investment would have grown to roughly £370 20 years later with dividend reinvestment, whereas, in cash your gross investment would have been unlikely to grow above £145.

Yet, our analysis shows that there is an estimated £430bn of UK consumer savings held in cash by 13mn individuals that could be invested. 

Despite greater share ownership delivering better financial outcomes for individuals, companies and growth, UK households have less than 4% of their financial assets in shares, according to a 2023 study from Centre for Policy Studies.

This compares to 36% in the US, while in Sweden, participation in capital markets is particularly broad with some 70% holding investment funds directly, according to Sweden’s Ministry of Finance.

So, what could be done to drive the levels of share investing back to 2003 levels?

To find a solution, we looked beyond the current market turbulence to insights from history. We explored three historical mass retail investing campaigns in our report, A New Message To Tell Sid, which you can read here.

The campaigns we explored were:

1. “Own your share of American business” in the US 1954-69
2. Voucher privatisation in the Czech Republic, 1991-93
3. “Tell Sid”, the privatisation of British Gas in the UK, 1986.

The first lesson is that public campaigns can have real impact, and even more so if they are sustained over a long period of time. In the Czech Republic, 75% of the population purchased vouchers; in the UK, there were 2.3 million applicants for British Gas shares; and, in the US, share ownership is now among the highest global levels.

The second lesson is that focusing on financial education can be done by the private sector and does not deter investors. In the 1954-69 New York Stock Exchange campaign, for example, financial education messaging took primacy.

Ruddick Lawrence, vice-president for public relations at NYSE, explained it as: “We said: ‘First understand the risk. Don’t invest if you can’t afford it. Secondly, have a cash reserve for emergencies. Don’t put the rent money or the insurance money in the stock market. Third, get good advice’ . . . And finally we said, ‘Get the facts. Buy stocks on which you can get information. And understand the facts, try to learn the facts.’”

A third lesson from our review was a surprise. When various financial incentives were included in campaigns, free shares or gas vouchers, they did not create a long-term investment culture. Instead, better informed investors benefited the most, and many sold out as soon as they got the immediate incentives.

In the Czech Republic, as the country tried to pass over ownership of state assets to the people following the fall of communism many of those who bought vouchers, that would later convert into shares in public companies, cashed them in for a 15% increase on what they paid. Despite the fact that the shares the vouchers had been converted into were now trading on the Prague Stock Exchange at many multiples of the value paid for the original vouchers, leading to a bonanza for investment funds. Today, only 6.4% of the Czech households own shares.

We tested out whether that thesis still works. For existing investors, financial incentives were most popular: their top choice was an additional tax-free purchase (51%, followed by a bonus amount of extra shares (41%).

However, potential investors found offers of free support more or as motivating as financial incentives: 45% chose support with choosing the best investment for them; 39% chose support with understanding risk.

That suggests that the government could seize the opportunity of the upcoming launch of the FCA’s new policy on financial advice, using this as a pivotal moment to launch a new public investing campaign.

Together, government and industry could then better support would-be investors by focusing support on practical steps to build confidence, like badged entry-level investment products, and messaging on simple outcomes that highlights the benefits of investing, not just the risks.

Perhaps then, we can become a nation of investors.

This article originally appeared in FT Adviser.