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Press Release press release 10 February 2016 Why investors should raise a cheer to the Bank of England’s 70th anniversary of nationalisation As the Bank of England marks 70 years in public ownership on 14 February 2016, Richard Stone, Chief Executive of The Share Centre assesses its role in managing the UK’s monetary policy. While the Bank of England – the old lady of Threadneedle Street – is over 300 years old, it has only spent the last 70 as a publicly-owned institution. It was privately owned by its stockholders until it was nationalised in 1946 by the post-war Labour government under Clement Atlee. Since then it has presided over wildly varying fortunes in the UK economy, from record inflation levels in the 1970s to today’s era of historically low interest rates. Base rates fell to 0.5% in March 2009 and have now therefore been at that constant level for nearly seven years. Richard Stone, Chief Executive of The Share Centre, says this period of stable economic conditions is good for personal investors and for the UK economy as a whole – and that much of it has to do with the independence granted to the Bank in 1998. Richard Stone, Chief Executive of The Share Centre commented: “The Bank of England has a long and proud history stretching back over 300 years. The last 70 of those have been in national ownership – and more recently as an independent public body. “Throughout, the Bank has had to have an eye on the money supply, inflation and interest rates. Free from political interference that mandate has been strengthened since independence in 1998 and the inflation track record shows the success the Bank has had since then. Indeed, we are currently in a period of historically flat and low interest rates and low inflation.” The confidence that economic stability has given to investors is reflected in a recent survey The Share Centre has carried out of its customers. While over a third believe we will not see another rate rise until the second quarter of 2017, a massive 86% say they are not concerned by the prospect of rates going up. Richard Stone added: “The Share Centre recently conducted a survey to which over 2,000 of our personal investor customers responded. More than 1 in 3 (36%) believe the next interest rate rise will not happen until at least the second quarter of 2017, with a massive 86% unconcerned about a rise in UK rates given the Federal Reserve’s recent increase to the US base rate. “Personal investors should welcome stable economic conditions, low inflation and low interest rates and should therefore raise a cheer to the Bank of England’s 70 year anniversary in national ownership and wish it a continued long and successful future managing the UK’s monetary policy.” THE BANK SINCE NATIONALISATION – A POTTED HISTORY At the time of nationalization the economic policy of the day was focused on a Keynesian approach. Since then the bank has seen government policy move to a more monetarist approach. Throughout, the bank has stood ready to intervene and support the UK economy administering the issuing of money and implementation, and more recently setting, of interest rates. The Bank of England’s main task is to manage the money supply and the cost of money (the base rate) within the UK. Base rates fell to 0.5% in March 2009 and have now therefore been at that constant level for nearly seven years. This is historic in the context of the Bank’s 400 plus years of existence as well as in the context of the last 70 years since nationalization. The last time rates remained unchanged for such a long period was during the Second World War Rates were cut to 2% in 1939 and did not increase again until 1951 when they moved to 2.5%. That 12 year period of constant rates was a record in the Bank’s history as is the currently rate of 0.5% which had never been seen before 2009. The main purpose of changing interest rates is to help control prices – inflation. In the Bank’s history since nationalization in 1946 the record on inflation has been somewhat mixed. Based on the retail price index (RPI), the average rate since 1946 has been 5.5% per annum. Since independence was granted to the Bank in 1998 the target has been 2% - significantly below that post-war average. Since 1998 the average RPI has been 2.8%, perhaps indicating the Bank of England’s independence has been successful in delivering lower inflation and lower interest rates. RPI inflation peaked at 24% in 1975 and fell as low as minus 0.5% in 2009 following the financial crisis. Investors in the stockmarket should generally welcome low interest rates and stable benign economic conditions – i.e. low inflation. Such conditions should allow companies to prosper and grow and make the returns on equity investment appear attractive as compared to cash. The stockmarket has performed strongly since the Bank was nationalized. The FT30 Index of the top 30 companies listed on the London market was launched at a base value of 100 in 1935. Having fallen during the Second World War it recovered and stood a little above that base level in 1946. By 1998 when the Bank was granted independence the index stood at over 3,000 and today is still above 2,600 – i.e. 26 times its level in 1935. ---Ends--- Note to editors: For further information please contact: The Share Centre Joe Dumont Sophie Hobart Nikki Beale Head of Corporate Communications PR & Internal Communications Executive Shares4Schools & PR Coordinator 01296 439 426 01296 439 129 01296 439 435 [email protected] [email protected] [email protected] Teamspirit PR Adam Smith Kate Cunningham Associate Director Senior Account Manager 020 7360 7816 020 7864 4138 [email protected] [email protected] Jenny Barrett Dom Bellamy Account Manager Account Executive 020 7360 7830 020 7864 4125 [email protected] [email protected] To view all our press releases and more from our investment advisers please go to blog.share.com 2015 Best Customer Service – Shares Magazine Best Online Stockbroker – Personal Finance Awards Highest Overall Client Satisfaction award - Investment Trends Best Customer Service – Investment Trends Best Customer Service – Online Personal Wealth Awards Best Stockbroker – Online Personal Wealth Awards Self Select ISA Provider of the Year - ADVFN International Financial Awards Best Online Stockbroker - ADVFN International Financial Awards 2014 Best Stockbroker for Customer Service – Financial Times and Investors Chronicle Best Online Stockbroker – Personal Finance Awards Best ISA Provider – Shares Magazine Highest Overall Client Satisfaction award - Investment Trends Best Customer Service – Investment Trends Best Stockbroker – MoneyAM Best Customer Service - MoneyAM 2013 Online Stockbroker of the Year - Financial Times and Investors Chronicle Execution-only Stockbroker of the Year – Financial Times and Investors Chronicle Best Online Stockbroker – Personal Finance Awards 2012 Stockbroker of the Year – Financial Times and Investors Chronicle Execution-only Stockbroker of the Year – Financial Times and Investors Chronicle Best Online Stockbroker – Personal Finance Awards Highest Overall Client Satisfaction award - Investment Trends Best Value for Money - Investment Trends Best Trading Platform - Investment Trends 2011 Best Online Stockbroker - Financial Times and Investors Chronicle Best Online ISA Provider - MoneyAM Best Small Cap Broker - Shares Magazine Highest Overall Client Satisfaction award - Investment Trends 2010 Best Small Cap Broker - Shares Magazine Best Online Funds Service - MoneyAM Risk Warnings: Investing in general, and the products and services mentioned above may not be suitable for all: if in doubt, individuals should seek independent financial advice. The value of investments and the income from them can go down as well as up and investors may not get back their original investment. Past performance is not a reliable indicator of future performance. The bases and levels of taxation relating to ISAs, CTFs and SIPPs are subject to change and the value of these tax allowances may depend upon the circumstances of the individual. About The Share Centre: The Share Centre was established in 1990 to provide value-for-money share services for private investors. Its range of services includes buying and selling shares (by Internet, telephone and post) and a comprehensive share administration and safe custody service. Tax-efficient investment ‘wrappers’ including ISAs, CTFs and SIPPs are also available. The Share Centre’s Advice team provides comment on market sectors, individual shares and funds on www.share.com. Access is available to customers and registered users of the site. Registration is free. To understand how our Advice team arrive at their views please read our Investment Research Policy. The Share Centre blog is also available at http://blog.share.com. In addition, account customers can receive individual telephone advice on UK-listed shares. The Share Centre Limited is a member of the London Stock Exchange and is authorised and regulated by the Financial Conduct Authority under reference 146768. Registered in England No. 2461949. Registered office: Oxford House, Oxford Road, Aylesbury, Bucks. HP21 8SZ. .
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