The UK stock market is on track to record its lowest trading volumes since 2002 as nervous investors sit on the sidelines amid uncertainty over the economic recovery.
This year, £2.5trn of UK equities are set to be traded, sharply down on a whopping £4trn in 2007 and the lowest relative to the value of UK plc for eight years, according to Equiniti, the UK's large share registrar.
Wayne Story, the chief executive at Equiniti, said: "Today, the markets are still in post-Lehmans shock. So far in 2010, trading in UK equities has been even thinner than in 2009 once you adjust for the increase in values since their recession-hit nadir." Traders will exchange shares worth 1.46 times the value of UK plc this year, but this is significantly down on 2007 when more than twice the value of the London Stock Exchange changed hands.
While nearly 70 per cent of the profits of UK-listed blue-chip companies are generated abroad, fears that the UK economy's recovery could be faltering continues to weigh on listed companies on these shores. Despite the upturn in the economy and stock market, this year's trading levels are still below 2009 and the average of 1.56 times the value of the market traded over the past decade, found Equiniti.
Mr Story said: "The euphoria of the five-year bull market up to its peak in June 2007 brought a massive increase in share trading volumes, far ahead of anything the UK had ever seen before. There has been a dramatic loss of energy in the stock markets since then."
This year will also be one of the most volatile of the past 10 years. Eight of the decade's 100 most volatile weeks came in the first half of this year. But 2010 is likely to pale in comparison with 2009, when 24 of the most turbulent weeks occurred, surpassing even the aftermath of 9/11 and the Iraq war turmoil.
The slump in trading volumes is a blow for the Government, which needs to replenish its empty coffers. Stamp duty reserve tax, the 0.5 per cent levy on shares changing hands, tumbled to £2.9bn in the year to 31 March 2010, down from £4.2bn for the same period three years ago.
But a recovery in share prices would compensate for the lower volumes this year, which should mean that tax revenues will recover in the year to next March, forecast Equiniti. It said the Office of Budget Responsibility's forecast for £3.1bn in the year to the end of next March "looks achievable". The blue-chip FTSE 100 index closed on Friday at 5,275.44, compared with 5,412.88 on 31 December 2009.