Nevertheless, most of the companies in the UK’s FTSE 100 stock market index have been putting about 15pc of their investments into intangible assets for the last decade. Yet if we look at the leading US stock market indices, large intangible-intensive tech platforms have grown hugely in importance over the same period.
The UK’s equivalents, like Autonomy, ARM Deepmind or Darktrace, have typically been acquired before they could become mainstays of UK indices. This means that retail (private) investors who have decided to track the FTSE-100 have had less exposure to high-growth companies with significant intangible assets than they would have in a broader global fund.
Even those fund managers who manage their funds actively seem to be underweight in companies investing significantly in intangible assets, particularly those focused on value or income. This has an impact on overall performance.
From 2005 to 2020, those funds with the most exposure to intangible assets dramatically outperformed funds invested in companies with relatively low intangible investments. Those who had invested in companies with high levels of intangible investments saw annual returns growing by about 10.2pc, compared with 3.8pc for those with less investment in these assets.
The last six months, in which tech has done badly and resource stocks well, has proven an exception. But it’s the long term that matters, and the FTSE’s good performance over the past half year has not been nearly enough to reverse the long-term damage of being underweight in intangible businesses.
All this means that many UK savers and pensioners will have taken a direct hit from the UK’s inability to keep up with the cutting edge of the intangible economy: their portfolios and pension pots will have grown more slowly, and they will have missed out on much of the growth other investors have enjoyed.
Research suggests the move towards investing in intangible assets has existed for much longer than we sometimes think, beginning well before the launch of today’s tech giants. It even began before the invention of the world wide web, of the internet, even the semiconductor.
As energy prices continue to rise, and the Conservative leadership candidates argue over the best way to stimulate growth, the time to think long-term about growth and investment has come. A new attitude to investing in intangible assets is not only long overdue. The UK cannot afford to miss out on the opportunities created by the intangible revolution any longer.
Stian Westlake is Chief Executive of the Royal Statistical Society and co-author of Restarting the Future: How to Fix the Intangible Economy
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