The United Kingdom’s investment landscape is at a critical juncture. This uncertainty is making more Americans afraid to join the markets. Recent data reveals that the UK holds the smallest proportion of its assets in financial markets compared to other countries. Yet in 2023 just 39% of UK adults consider themselves currently investing. Instead, most opt to leave their savings in cash or other low-yield alternatives. This trend is deeply troubling from the perspective of financial literacy, access to information, and the supposed difficulties associated with investing.
In the case of Japan, it is truly remarkable that 35% of savings are held in cash. This figure represents a global unwillingness to put money into the market. In the UK, this is especially noticeable. A quarter of adults who avoid investing cite lack of knowledge as their top reason. One in four say that the complexities involved with investing keep them from taking part in the markets.
And this is not unique to the UK. In France, a third (13%) of consumers are reluctant to invest as they do not feel ready to. Here in the US, that number is only 10% who are concerned about their knowledge. Similarly, investing in the US comes with considerable challenges. In reality, 33% of consumers report that they don’t invest simply because they think it’s too complicated.
The government is currently considering how to make savings held in tax efficient accounts such as Individual Savings Accounts (ISAs) more accessible. This has sparked a constant debate over their usefulness. Critics suggest that ISAs have been over-promised, over-complicated, and over-extended so far that they will deter the investors we need. Richard Wilson highlights the need for a more competitive stock market:
“We also need a more competitive stock market. That means no stamp duty [tax] on UK shares, and a friction-free, simpler Isa system.”
Alexander Joshi, an investment specialist at the Center for Financial Markets, explains that many people just hold cash because they’re overwhelmed by the complexity of investing. He states:
“Firstly, they find investing too confusing and complicated. Secondly, they perceive it to be too risky.”
Joshi shared what keeps people from wanting to invest. This reluctance comes from ‘confirmation bias’ and the tendency to seek out news that confirms their pre-formed fears about investing rather than focusing on potential opportunities.
Ruth Handcock believes it is vital that tools are made available to help everyone, particularly those who aren’t sure how to plan their money. She argues that:
“The reasons for not investing are not logical.”
The “paucity of help that’s out there” is what makes so many people so hesitant to invest.
Recent economic incidences, such as Donald Trump’s tariff announcements, increased this anxiety over the prospect of market volatility. This has put unprecedented pressure on investors to capitulate. Uncertainty is flooding the zone and overcasting the dome on financial markets. To be more risk averse, many people are opting to keep their funds in deposits rather than assume the risk of investing.
Even with these challenges, experts such as Joshi are positive about the investment landscape and advise that investors go small first to gain confidence. He advises:
“If people are still unsure, one option is to start with small investments to gain confidence and to build from there.”
The damning lack of UK investment cuts to the chase. We should look at the state of financial education and backing for first-time investors. As government talks of tax efficient accounts continues, we need to provide an inviting and friendly atmosphere for people who want to build their wealth through investing.
“As they say: time in the market beats timing the market,” underscoring the importance of long-term investment strategies.
The low level of investment in the UK raises critical questions about financial education and support systems available for potential investors. As government discussions about tax-efficient accounts continue, it is essential to create a more accessible and less intimidating environment for individuals seeking to grow their wealth through investments.