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Accompanying the release is an opportunity to comment on the Ownership of UK quoted shares 2012 by completing the user feedback survey.
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Understanding the data
Interpreting the data
This statistical bulletin, produced by the Office for National Statistics every two years, shows the ownership of ordinary shares in quoted companies in the UK at 31 December 2012.
Share ownership is measured using data from Euroclear (CREST), the electronic settlement system for equity share trading, and further analysis of share registers. Tables 1, 3, 6, 7 and 10 accompanying this statistical bulletin show the market value of UK quoted shares by beneficial owner, with multiple ownership and excluded shares in paper form shown separately.
In order to identify the true beneficiary of multiple ownership pooled accounts, a sample of these accounts from company share registers were analysed. The analysis is further described in the methods section of the background notes. Tables 2, 4, 5, 8, 9, 11, A and B show the sector of beneficial owner after the multiple ownership pooled nominee accounts and excluded shares in paper form have been allocated to a category of beneficial owner.
Care should be taken when making comparisons between years. In 1998 the survey switched to using data from the Euroclear (CREST) system, which led to discontinuities. The largest impact was that some companies previously classified to unit trusts and investment trusts are now classified as other financial institutions. This makes long-term trends in these sectors hard to identify. Note also that the analysis of pooled nominee accounts was not updated between 1998 and 2008. For each of these years the 1997 analysis was used to compile the results.
Note that the share ownership analysis has not been carried out at uniform intervals and care should be taken when interpreting figures 3 to 7 and tables A and B.
Uses of the data
The key purpose of the share ownership estimates is to populate the financial accounts. The data are used to derive the asset breakdown for the transaction line ‘Quoted Shares’ in the financial accounts and, in the absence of any other information, the transaction line ‘Unquoted Shares’.
The main use of the data externally is to provide definitive or benchmark data on the ownership of shares in UK companies. Individual companies need to know who own their shares but there is also an interest in ownership more widely and the implications for policy in, for example, growing overseas ownership or declining ownership by individuals. The ONS data provides this benchmark every two years. ONS regularly engages with users to gain feedback on the data. A Share Ownership User Group was set up in 2012 to take key users and stakeholders through the methodology used to produce the results. A further meeting of the Group will be held on 2 October 2013. ONS has also regularly consulted with users on a bilateral basis.
External users' main concerns with the data reflect the extent to which the published data differ from the industry view or outside analysis. The differences in view may in part be due to differences in definition (for example, the difference between the beneficial owner and the registered owner) but they may also be due to sample size. ONS continues to liaise with users to ensure that any differences in view are fully explored and reconciled.
There is also some concern over the extent to which the data are comparable over time. As noted elsewhere, the analysis of pooled nominee accounts conducted in 1997 was not updated until 2010. This means that there are issues of comparability with the data for 1998 to 2008. ONS have given more emphasis to this issue in the presentation of Figures 3 to 7 in the main part of the Bulletin. ONS have also tried to ensure that the 2010 and 2012 data are comparable and may revisit earlier year’s data when resources are available.
Finally, given their growth in recent years, there is an interest in additional detail on the Rest of the World holdings. ONS have tried to meet some of these needs with a new table (Table 4) providing a sector breakdown.
Definitions and explanations
American Depositary Receipt (ADR) programme: An ADR is a negotiable certificate denominated in U.S. Dollars issued by a U.S. bank representing a specified number of shares in a foreign stock traded on a U.S. exchange or Over-The-Counter (OTC) market.
Beneficial Owner: The true underlying owner of the share who receives the benefits of holding the share, for example income through dividends.
Buyback: The repurchase of shares by the issuing company in order to reduce the number of shares on the market.
Dematerialisation: Shares that are dematerialised are held in electronic form, rather than in paper form.
Excluded shares: These are shareholdings not held on the electronic share register but held instead in paper form, such as some share holdings of company directors.
FTSE 100: The FTSE 100 index is the most widely used UK stock market indicator. It tracks the performance of the top 100 companies, representing around 80% of the total market capitalisation of the London Stock Exchange. The index has a base level of 1000 on 3 January 1984.
Held in treasury: The portion of shares that a company keeps in their own treasury. Treasury stock may have come from a repurchase or buyback from shareholders or it may never have been issued in the first place.
Market Capitalisation: Total value of a listed company’s shares in issue, calculated as the number of shares multiplied by share price.
Multiple ownership pooled nominee accounts: One entry on the share register representing many beneficial owners from at least two different sectors. Therefore the electronic share register cannot give the complete breakdown of beneficial ownership sector.
Ordinary shares: An ordinary share gives the right to its owner to share the profits of the company (dividends) and to vote at general meetings of the company. They are the most common form of shares in the UK.
Quoted shares: Shares that are quoted on the London Stock Exchange. The definition of a quoted company then follows from this.
Share Ownership is measured using the share ownership survey. For each share ownership survey, a sample of companies is taken from a database supplied by the London Stock Exchange. The typical sample size is around 200, with the top 85 or so largest companies in terms of market capitalisation automatically selected and the remaining companies drawn with their probability of selection proportional to their capitalisation. This sample design ensures a large coverage in terms of market capitalisation and reduces the need for a larger sample, which would add to the cost of doing the survey. Thus, for 2012 for example, 200 companies were selected, representing 83% of total UK market capitalisation. The sample comprised the 85 largest companies, each with market capitalisation greater than £2.2 billion, and 115 smaller listed companies.
For these sampled companies, the beneficial owners are obtained. Since 1998 data are acquired from Euroclear (CREST), the electronic settlement system for equity share trading. Each registered participant in CREST has to specify to which National Accounts category the beneficial holder of the shares belongs. This information is used to estimate the value of UK quoted shares by sector of beneficial owner on a particular date.
The table below lists these sector categories, which follow UK National Accounts, in line with European System of Accounts 1995 (ESA95).
Euroclear (CREST) categories of beneficial owner
Individuals Charities, churches etc Insurance companies Pension funds Investment trusts Unit trusts Banks Other financial institutions Non-financial companies Central Government Local Government Public Corporations Non-resident: owner in EU Non-resident: owner outside EU Multiple ownership: pooled nominees
Annex B provides more detail on the composition of each of the categories. The multiple ownership category covers all those accounts where the beneficial owners are from two or more of the categories listed in Table 1.1, and are referred to as pooled nominee accounts.
Additionally, there are excluded shares not held on CREST. These are shareholdings in material form, such as some shareholdings of company directors. This value is calculated as the difference between the total shares in issue on the London Stock Exchange and those held on CREST. These excluded shares are still required, and the Waterlow Stock Exchange Yearbook is used to identify any major shareholdings, which are then assigned to the correct beneficial ownership sector. Within the excluded shares are the Central Government shareholdings as a result of the Government interventions in the financial sector. The value of these shareholdings is obtained from administrative data and is consistent with data published separately in the UK National Accounts.
The remaining excluded shares are allocated to two sectors – Individuals (88.4%) and the Rest of the World (11.6%). These percentages are based on analysis by Equiniti and Orient Capital for the 2012 results.
Work on Multiple ownership for the 2010 results
Up to and including the release of the Share Ownership 2008 publication, multiple sector ownership holdings (and any remaining unidentified excluded shareholdings) were apportioned across the sectors using fixed percentages, derived in 1997. Following a review in 2011, ONS tendered for a specialist company to update the analysis. The company chosen, Equiniti, had 42 of the FTSE 100 businesses as Registrar clients. This meant a large proportion of total pooled nominee holdings by market value could be analysed. The results of this work were published in the 2010 publication.
Work on Multiple ownership for the 2012 results
The work undertaken for the 2010 survey was updated for the 2012 results. Equiniti and Orient Capital successfully tendered for the work and introduced a number of further improvements to the methodology:
- The sample size was increased. The coverage of the pooled nominee holdings was increased from £288 billion in the 2010 survey to nearly £500 billion
- The analysis was extended to single as well as pooled nominee accounts. The total size of the holdings analysed was over £760 billion, over one half of the total shares on the Stock Exchange (in terms of market capitalisation)
- The sample was made more representative in terms of the relationship between the distribution by sector in the sample and the distribution in the population
More details on the methodology can be found in Share Ownership Methodology, published in July 2013.
ONS would like to thank Equiniti and Orient Capital for their work on the 2012 results.
The Quality and Measurement Information Report for Share Ownership will be made available in due course on the National Statistics website.
There have been a number of improvements to the quality of the share ownership results in recent years. The two main improvements – the work on multiple ownership by Equiniti for the 2010 results and the work on multiple ownership by Equiniti and Orient Capital for the 2012 results - are described in more detail in the previous section. The quality of the share ownership results for 2012 is likely to be high. The sample is representative and provides a high coverage, steps have been taken to reduce the main source of non-sampling errors and there has been significant input to the work by Equiniti and Orient Capital, who are recognised experts in the field.
As noted in the section on Uses, external users' main concerns with the data reflect the extent to which the published data differ from the industry view or outside analysis. This will be discussed further at the User Group meeting arranged for 2 October.
Sampling errors will arise when estimates are based on a sample rather than the whole population. In 2012, the Share Ownership Survey collected data from a sample of 200 companies, representing 83% of total market capitalisation. The sample comprised the 85 largest companies and 115 small companies (the largest companies comprise about 77% of total market capitalisation). Errors in the estimates mayl arise to the extent that the 115 small companies were unrepresentative of smaller companies in total, for example in the proportion of beneficial owners classified to the insurance sector.
Non-sampling error can arise due to errors in measurement and process. The primary data source for the Share Ownership Survey is CREST. Each registered participant in CREST has to specify, when setting up their account, to which National Accounts category the beneficial owners of the shares belongs. This information drives the allocation of the results and it is important that it is accurate and regularly maintained : a joint letter from Euroclear and ONS was sent to CREST clients in November 2012 emphasising the importance of the sector allocation on CREST and asking them to review their member account categorisation.
Non-sampling errors may also arise in the analysis of share registers. Identifying the true beneficial owners is a specialised undertaking and in recent years this task has been undertaken by Equiniti (2010) and Equiniti/Orient Capital (2012).
There are some revisions to the previously published estimates for 2010. These are described in the main part of the Bulletin.
MQ5: Investment by Insurance Companies, Pension Funds and Trusts
Public Sector interventions in the Financial Crisis
London Stock Exchange
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The complete run of data in the tables of this statistical bulletin is available to view and download in electronic format through ONS Time Series Data. Users can download the complete bulletin in a choice of zipped formats, or view and download their own selections of individual series.
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Annex A: Beneficial ownership
The share ownership data are used to improve the sector breakdown of the ownership of shares in the National Accounts and to assign the dividends received to the correct sector of ownership. This use essentially defines the concept of beneficial ownership – the beneficial owner is the person or organisation who benefits from the dividends or increases in the share price.
The beneficial owner is not necessarily the person or organisation managing the shares or the registered owner whose name appears on the share register and on CREST. In particular, since the dematerialisation of shares in 1996 there has been a growing trend towards investors using pooled nominee accounts: at the end of 2012, 59.4% of the total value of UK shares was held by multiple ownership pooled nominees. In these cases, in order to identify the true beneficiary, further analysis needs to be conducted on the accounts.
The difficulties in identifying the beneficial owner can lead to differences between different outputs even where they are trying to measure the same thing (this is over and above any differences that might result from factors such as differing sample sizes). There are a number of holdings which are difficult to analyse conclusively and judgements sometimes need to be made based on the information available. This is why it is important to use the services of a specialist company in this area.
Other outputs can sometimes be measuring something different eg economic exposure or interest. The ONS statistical bulletin MQ5: Investment by Insurance Companies, Pension Funds and Trusts also reports investment in UK quoted shares by insurance companies. The numbers can sometimes differ significantly from the figures reported here. The difference could in part be attributed to funds and other investment instruments run by insurance companies, which the 2012 share ownership categorises as other financial institutions. In addition, the analysis of share registers to identify the true ownership of pooled nominee accounts classifies pension funds run by insurance companies as pension funds.
The analysis published in this Bulletin is also a snapshot, taken at 31 December. At any one point in time shares might have been lent or sold but CREST may not have been updated in time for the snapshot; or CREST might have been updated where the change of ownership, although real, is only temporary. The following examples illustrate some of the difficulties in identifying or defining ownership:
- If a bank holds shares as a depository for an insurance company, then they should still be classified to the insurance sector as ownership will not have changed
- Shares are regularly lent between sectors. In principle, these should be recorded under the sector borrowing the shares as ownership has changed. In practice, some depositaries disclose lent shares and it may not be possible to identify which shares have been lent. There is the further issue that if shares on loan are recorded with the new owner, shares that move in the other direction should be treated in the same way; however, there may be an interest in recording the gross position, representing economic exposure or interest rather than ownership
- If the insurance sector puts up shares for collateral for a financial transaction it may not be clear who owns the shares. An example is where an open derivative position is held and the shares are used as collateral. The shares may be reregistered and then classified as other financial institutions but the beneficial ownership remains with the party that has lodged the collateral
Annex B: Beneficial Ownership Categories
Accounts should be classified according to the category of beneficial owner of the securities. Institutions or individuals that are not resident in the UK are classified to one of the two ‘overseas’ categories. For the purposes of this coding only, residents in Ireland, the Channel Islands and the Isle of Man are classed as ‘overseas’.
Pooled nominee accounts where the beneficial owners all fall into one of the categories listed below should be classified to that category. Otherwise, they should be classified to ‘multiple ownership: pooled nominees’.
- Individuals: Includes holdings owned by individual persons resident in the UK (whether registered in their own name, through a PEP/ISA, or as clients of a stockbroker or fund management group); shares held for employee share ownership schemes; and shares held in trusts with named individual beneficiaries
- Charities, churches etc.: Includes all private non-profit making bodies, including private trusts set up for charitable purposes, charities and holdings by universities and the church commissioners
- Insurance companies: These are active in both life insurance and non-life (general) insurance
- Pension funds: This includes local authority, public corporation and private pension funds. Pooled pension funds managed by insurance companies are now classified here rather than insurance companies
- Investment trusts: Comprises authorised investment trusts and authorised closed-ended investment companies incorporated in the UK, including PEP/ISAs run by them
- Unit trusts: Comprises authorised unit trusts, including PEP/ISAs run by unit trusts. Open-ended investment companies (OEICs) are now included in this category, rather than investment trusts as both unit trust and OEICs are open ended funds
- Banks: Comprises institutions authorised as deposit takers by the Bank of England
- Other financial institutions: This includes market participating holdings such as clearing accounts, market makers, stock lending and collateral accounts. This also includes funds such as index funds, exchange traded funds, hedge funds, socially responsible and ethical funds
- Non-financial companies: Includes private limited companies (Ltd’s), public limited companies (PLC’s) and unincorporated partnerships, such as firms of accountants and solicitors. Corporations owned by central government or local authorities should be classified to public corporations
- Central Government: Includes government departments, government agencies and the Bank of England (including its issue department and banking department)
- Local Government: Includes holdings held directly by local authorities. Securities owned by local authority superannuation funds should be classified to pension funds
- Public Corporations: Comprises corporations which, although owned by central government or local authorities, have substantial freedom to conduct their affairs on ordinary business lines. Securities owned by public corporation superannuation funds should be classified to pension funds
- Non-resident: owner in EU: All institutions or individuals resident in countries of the European Union other than the UK
- Non-resident: owner outside EU: All institutions or individuals resident in countries outside of the European Union. Also includes beneficial owners who are known to be resident abroad, but where the country of residence is not known precisely, and pooled nominee accounts where the beneficial owners are all non-residents but the split between EU and non-EU residents is not known
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