RUTH SUNDERLAND: Buy shares and support Britain

Seventy years ago, the New York Stock Exchange (NYSE) embarked on a public relations campaign that revolutionized its fortunes and those of many small investors and businesses.

The world was mired in the Cold War and the stain of the great crisis of 1929 still hung over Wall Street.

Some advertising expert came up with the slogan, “Own your share of American business,” which ran for 14 years.

The program described investing in stocks as a patriotic act, combining self-interest in the form of personal gains with the broader national interest of supporting

American businesses, creating jobs and driving prosperity. Being a small investor meant doing your part to promote the American dream and safeguard the free world against the communist threat.

Even to this day, the effects of that campaign are visible in America’s thriving culture of individual stock ownership. Despite Thatcher-era privatization, there is no such culture here.

The trend is going in the opposite direction and it is alarming.

The last few years have been brutal for companies listed on UK stock markets and, in particular, for smaller companies, as a report by research group New Financial explains.

The number of small businesses – those with a market value of less than £1 billion – has fallen by almost a third, equivalent to the loss of 600 listed companies. This may not matter as much if there was a healthy flow of new listings, but the markets are not recovering. Before the financial crisis, about 300 smaller companies flocked to the stock market each year. That has now dried to a trickle of water.

By contrast, private equity is an increasingly important source of capital: the value of acquisitions of smaller companies has almost doubled in recent years. The problem with this is that private equity moguls are short-termists, with a three- to five-year horizon.

For small businesses to become large, they need long-term capital. Why does it matter? Small publicly traded companies are very important to the economy.

They have combined revenues of £170bn, employ over a million people, are present in all regions and countries and need long-term capital.

What can be done? One idea is to pressure, or even force, pension funds to invest more in UK shares in general and smaller companies in particular. Another is to refrain from attacking the tax concessions for investors in the junior AIM market. Changing incentives so that some of the almost £300bn in tax-free cash ISAs are converted into shares ISAs could also help.

However, what we really need is a cultural change so that people accept the concept of using their pensions and savings to support the UK economy.

This is what has happened in the United States since the 1970s, when savers were forced to take care of funding their own retirement, rather than relying on employers to provide their pensions. We are probably 20 to 30 years behind.

The Cold War has faded into the annals of memory, but with Putin at large and the Middle East in crisis, the world is a dangerous place and our prosperity is not assured.

It’s time to follow the example of the New York Stock Exchange and beat the drum for owning a piece of British companies. We cannot have capitalism without healthy capital markets.