Home Business NewsBusiness How Thatcher brought share trading to the people

How Thatcher brought share trading to the people

by LLB Reporter
10th Apr 13 6:04 pm

Gavin Oldham, CEO of The Share Centre on why a lot of businesses owe their existence to Thatcher

Margaret Thatcher may be regarded as a politically divisive figure, but her impact on the City and the current generation of UK shareholders can’t be understated.

Her reforms in the City disrupted the status quo and heralded a revolution in share ownership, opening the doors to the general public buying into companies they worked for or bought from, rather than simply high net worth individuals.

A key reform behind the change was the removal of the separation between principal and agent in the stock market, which brought sweeping changes and an end to the restriction on competition in the City. Previously, stockjobbers were not able to deal directly with the public, while brokers weren’t able to run principal positions. But in the two years preceding the change in regulation, coming into effect on 27th October 1986, mergers between stock brokers, stock jobbers and merchant banks had been rife to take advantage of the changes, which also presented a new opportunity for mass share ownership. For instance, the firm I worked for at the time, Wedd Durlacher Mordaunt, was acquired by Barclays, and as a result we founded Barclayshare, the stock broking arm of the bank. Combined with the rise of electronic trading systems post 1986, this opened up a new avenue of contact with the general public, as customers could trade via the bank’s national branch networks.

“the public ownership of shares was also encouraged by Thatcher’s removal of the commission cartels”

But the public ownership of shares was also encouraged by Thatcher’s removal of the commission cartels. The minimum commission for brokers had been prohibitively high for the vast majority of general public prior to the reforms, and brokers in turn focused their efforts on high net worth individuals. The abolition of fixed charges made it more practical to target the general public – with the creation retail of stockbrokers such as Barclayshare – laying the groundwork for a more democratic form of shareholding.

At the same time, through the mass privatisations, Thatcher helped to kick-start the process of share ownership by the masses. Public share offerings such as British Gas and British Telecom not only raised the awareness of shareholding, it provided the average UK resident the chance to do so, at a time when barriers to small investors were being removed.

So, the privatisations, compounded by the reforms, enabled people to own part of the businesses they worked in and whose products they bought, and so brought a better understanding of what makes enterprise tick.

As a result, it is companies like The Share Centre, which I established in 1991 after leaving Barclays that owe their existence to the reforms introduced by Margaret Thatcher. We are passionate about the benefits of more people enjoying straightforward investing, and we will continue to play our part, as we have done for the past 22 years, in establishing a share owning democracy.

Margaret Thatcher’s legacy of reformed share ownership can evolve into a fairer and more equitable path for democratic capitalism. Capitalism is crucial to fostering enterprise, but its intermediation infrastructure has become excessive and parasitic. With so much controlled or owned by institutions, the path to individuals gaining a sense of ownership is popular capitalism.

Popular capitalism means people gaining direct ownership. If people have a sense of ownership and enfranchisement, they take more responsibility. Additionally, by investing directly in businesses, people can reduce their dependency on bank loans when money is needed. Directly owned savings and investments also provide a much more secure basis for retirement income. 

Popular capitalism is something I have been outspoken on for more than thirty years, and why I started The Share Centre. But while we still have a way to go, we owe much of the progress we have made towards a shareholding democracy to Thatcher’s policies. 

Gavin Oldham is the CEO of The Share Centre.

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