Foreign investors now own 66% of UK-listed shares, up from 64% in 2019, according to analysis of the London market that shows a steep decline in domestic holdings by British shareholders. Europeans have increased their holdings in companies quoted on the London Stock Exchange the most in the last two years, ahead of US investors and increasing interest from Chinese-based funds, said the investor relations consultancy firm Orient Capital. British pension funds own only 2% of the London stock market following a steep decline in recent years. In 2013 British pension funds owned 8% of London-listed shares by value, but over eight years that has dropped by three-quarters. US investors were the biggest holders, especially US mutual funds, which now own more UK shares than are held by UK unit trusts. Alison Owers, global chief executive of Orient Capital, said: “The UK stock market, in common with leading stock markets around the world, is dominated by big multinationals whose operations span every continent and compete with global peers, wherever they happen to be listed. “There is therefore no logic for investors only to consider companies that happen to be listed at home,” she said. Efforts to impose corporate governance rules on UK-based corporations have come under heavy fire after a series of only mild protests by shareholders in response to claims of excessive pay and risky corporate behaviour. Corporate governance campaigners have argued that the increasing diversity of ownership allows board directors to escape criticism when they are subject to votes at annual general meetings, leading to proposals for workers on boards. Orient said that just as foreign investors have come to dominate shareholdings in London, so UK investors are diversifying internationally, with fund flows into global unit trusts far outweighing those into UK-focused funds. John Ralfe, a pension expert, said the report underscored the trend for fund managers to look globally when investing pension savings. But he said the low level of share ownership in UK businesses by British pension funds did not mean they were not investing in UK firms by other means. “They are just doing it in other ways. They are lending to British businesses over long time horizons by buying their bonds and by investing in infrastructure funds,” he said. European investors have increased their holdings of UK shares the most in the last two years, and now claim a 19% stake – up from a post-Brexit referendum low of 15% in 2019. China’s cash-rich public corporations have also invested heavily in London. They have more than doubled their holdings from 0.7% in 2019 to 1.7% in 2021, said Orient Capital. Foreign investors are most interested in UK-listed mining, healthcare and consumer goods companies. Owers said: “As UK investors have looked further afield to find the best opportunities and to maximise the benefits of diversification, so foreign investors have come to our shores.”