Savings Sorted. Time to Invest.
Savings habit sorted, but how do we get Brits investing?
The message from Chancellor Rachel Reeves’ 15 July Mansion House speech was pretty clear: Brits hold too much cash; we need to get investing.
It’s not just the squandered opportunity for us to build long term wealth that frustrates the Chancellor, it’s also the missed chance to unlock the UK’s illusive economic growth.
Recent economic data gave us a reminder of the issue – the UK economy shrank 0.1%1 in May. Part of the problem lies in our weak productivity – the efficiency of the economy – which has stalled since the Global Financial Crisis of 2008. Businesses simply aren’t investing in new technologies, which Reeves thinks could change if savers could be persuaded to invest.
Skip across the pond to the US and you’ll find a very different story and an army of armchair investors. So, why are Brits avoiding stock markets?
A change in behaviour
Among the many things that the pandemic changed, one was our appetite for saving, with JP Morgan calculating that, despite a nasty cost of living crisis, since then we’ve stashed away an extra £870 billion2. It now makes us more prudent savers than the Germans, and significantly more so than the Americans.
UK businesses might’ve hoped some of these savings would flow their way, but it appears not to be the case: half of the £870 billion is currently residing in cash and cash-like instruments2, with business investment having changed little since 2019.
It’s having a dramatic effect on our economy. Low productivity is one of the key restraints to UK growth and it’s making the Chancellor’s job a tricky one. If the puzzle can’t be solved, then our national finances will become increasingly strained, and the UK’s debt will spiral as a percentage of GDP over the decades to come.
What’s going on underneath
Of course, holding some cash is vital for emergencies and short-term goals, but the reasons behind why we hold levels beyond this is more complex to untangle.
Of those surveyed by JP Morgan, many believed cash would perform better than stocks2. This appears misguided when viewed through a historical long-term lens. Figures from AJ Bell showed that £10k saved in a typical cash ISA ten years ago would’ve been worth £11,513 at the end of May, versus £17,999 if the money had been invested in a FTSE All Share tracker3.
Respondents also liked the accessibility of cash and thought investing was too risky2. Studies commissioned by the FCA also point to individuals feeling that they lack knowledge of stock markets and therefore confidence, and that they are not the right sort of person who should be investing anyway4.
If we look to overall household wealth, Brits also appear obsessed by the housing market, with 48% of total UK household wealth represented by property and only 7% by investments in equities and funds. In the US, these figures are 28% and 32% respectively2 (see chart below).
The predilection to property likely stems from the experience of the past 25 years, which has seen house prices rise significantly, boosted by readily available and cheap mortgages and housing stock undersupply. But it has left the property market out of reach for many individuals, pointing to potentially more muted returns in the future.
Why the Americans seem so much more comfortable with stock market investing also isn’t clear, but likely involves a cultural component and the comfort they have with risk taking. What’s more, having the world’s preeminent growth companies on their doorstep makes the investing proposition more enticing.
In the UK, historically poor financial education has hobbled us from a young age, leaving individuals feeling underconfident and fearful of taking risk. Today, financial education is part of Personal Social Health Economic Education in secondary schools, but the subject is non-statutory curricula, meaning teaching varies widely from school to school.
There is, of course, financial advice - there to help individuals step into the world of investing and make good investment decisions - but many find it inaccessible due to the costs involved. This is referred to as the ‘advice gap’ and it’s been steadily growing.
Reeves also touched on the overly negative risk warnings that come with retail-marketed financial products and the lack of balance with the benefits of long-term investing, which she’s believes is putting investors off. Recently, the UK’s largest share dealing platform, Hargreaves Lansdown, trialled more balanced risk warnings that included the benefits of long-term investing, and found an 8.7% uplift in Stocks & Shares ISA openings amongst new clients to the platform and a 23% uplift among current clients.
Finally, when we do have investments, there’s a tendency to be disengaged or disintermediated from them. US pension systems are more geared towards defined contribution (DC) schemes and Americans making their own investment decisions; in the UK, we have a mix of hands-off defined benefit (DB) and hands-on DC workplace pensions, but even in the case of the latter, financial institutions often run schemes for employers that require minimal involvement from employees.
Zero to investor
If Reeves is to be believed, Britain appears to be on the brink of a Cambrian explosion in retail investing . A raft of reforms is in the pipeline.
First, a potentially splashy national advertising campaign next year to raise awareness, reminiscent of Margaret Thatcher’s 1986 ‘Tell Sid’ TV campaign that encouraged Brits to buy shares in the newly privatised British Gas.
Second, the government will review how risks are discussed with investors, potentially introducing greater balance.
Third, a new form of financial advice is to be created called ‘targeted support’, which will allow firms to assist groups with similar needs to make more appropriate investment decisions i.e. those in drawdown or those with too much cash.
Fourth, the government is looking to reform stock exchanges to drive greater investor interest in British companies and stem its shrinking presence on the world stage and change its reputation for housing ‘old economy’ value sectors such as mining and banking. Included are plans for Private Intermittent Securities and Capital Exchange System Sandbox (PISCES) – the wordy name for a new type of stock exchange for private companies, aiming to encourage investment in the British growth companies of tomorrow.
And finally, fifth, there will be a review into how financial topics are taught at a national level. On a smaller scale, it is likely we’ll see many financial services businesses attempt to help investors at an earlier stage in the investing journey with better educational content.
1Source: Guardian; as at 11/07/2025
2Source: JP Morgan; as at 19/06/2025
3Source: AJ Bell; as at 15/07/25
4Source: FCA; as at June 2025
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