Britain’s failure to invest in technology was a disaster for savers

However, most companies in the UK’s FTSE 100 stock market index have been investing around 15 per cent of their investment in intangible assets over the past decade. However, if we look at the leading indices of the US stock market, the large technology platforms based on intangibles have greatly gained in importance over the same period.

British equivalents such as Autonomy, ARM Deepmind or Darktrace, were usually acquired before they could become pillars of British indices. This means that retail (private) investors who chose to track the FTSE-100 had less exposure to fast-growing companies with significant intangibles than they would have in a broader global fund.

Even those fund managers who actively manage their funds appear to be underweight in companies that invest significantly in intangibles, particularly those focused on value or income. This affects the overall performance.

From 2005 to 2020, those funds with the greatest exposure to intangibles dramatically outperformed funds invested in companies with relatively low intangibles. Those who invested in companies with high levels of intangibles saw annualized growth in returns of about 10.2%, compared to 3.8% for those with less investment in these assets.

The past six months, in which technology has performed poorly and resource stocks have performed well, have proven to be an exception. However, it is important in the long term and Good FTSE performance in the last six months, it was not nearly enough to undo the long-term damage from being underweight in intangibles.

All of this means that many UK savers and retirees will be directly affected by the UK’s inability to keep up with the cutting-edge intangible economy: their portfolios and pension pots will grow more slowlyand will miss out on much of the growth that other investors have enjoyed.

Research shows that the shift to investing in intangibles has been around for much longer than we sometimes think, and began well before the launch of today’s tech giants. It even started before the invention of the World Wide Web, the Internet, even the semiconductor.

As energy prices continue to rise and conservative leadership candidates squabble over the best way to spur growth, the time has come to think long-term about growth and investment. A new attitude towards investing in intangible assets is not only long overdue. The UK can no longer afford to miss the opportunities created by the intangible revolution.

Stian Westlake is chief executive of the Royal Statistical Society and co-author of Restarting the Future: How to Fix the Intangible Economy