Britain: An official handbook > 1977

FINANCE
Building
Societies
The Stock
Exchange
365
and a trustee company which holds the assets. Normally, the managers sell
units to the public and must invest the proceeds in a fairly wide range of stock
exchange securities. The costs of running the trust are defrayed partly by an
initial charge which forms part of the price of a unit and partly by a half-
yearly service charge which is usually taken out of the income of the trust.
The level of both charges is controlled by the Department of Trade, whose
authorisation is required before units can be offered to the public; this is
only granted if the trust deed meets the Department’s requirements.
The first British unit trust was formed in 1931 and by 1939 there were
98 trusts, with assets estimated at ^80 million. At the end of July 1976 there
were 2-2 million unit holdings. The value of the funds invested in authorised
trusts depends on the value of the underlying securities; from only £60
million at the end of 1958 they had risen to £2,544' million at the end of
July 1976. There is a wide variety of trusts, both in the range of investments
covered and in the ways of catering for the differing needs of investors.
The principal function of building societies is to supply long-term loans on
the security of private dwelling-houses purchased for owner-occupation,
though loans are occasionally made on the security of commercial and indus¬
trial premises and farms. The funds of building societies are derived mainly
from the general public who invest in shares or deposits. The amount of
share capital is not fixed; shares are not dealt in on the stock exchange but
may be withdrawn at par in cash if notice is given. The Building Societies Act
1962, which consolidated all earlier legislation, prescribes the general way in
which societies must conduct their business. The Chief Registrar of Friendly
Societies has discretionary powers to stop a society either advertising or
accepting money from investors if he considers that the way in which the
society’s business is conducted is jeopardising investors’ money. The rapid
expansion of building society activity in the twentieth century has been
accompanied by a concentration of most of the business in the hands of a few
large societies. At the end of 1975, 382 societies were registered, with total
assets of about £24,200 million; just over half of this amount is accounted for
by the five largest societies. The amount advanced on mortgage in 1975 was
£4,900 million, 67 per cent more than in 1974.
The stock exchanges of the United Kingdom and Irish Republic amalgamated
on 25th March 1973. Dealings with the public remain unchanged, but brokers
may open offices nationally and firms wherever situated trade on equal terms.
The main exchange and central administration are in London. There are
also trading floors in Glasgow, Liverpool, Manchester, Birmingham, Bristol,
Cardiff, Belfast and Dublin.
The number and variety of securities officially listed on the Stock Exchange
are greater than in any other market in the world and its turnover of company
securities is roughly equivalent to that of all the European bourses combined.
Some 9,000 securities are quoted on the Stock Exchange; at the end of
March 1976 these had a total market value of £250,000 million. About
7,500 securities of companies were quoted, including a number of leading
overseas companies. Company issues represented more than four-fifths of the
securities at market valuation, the remainder being United Kingdom, Irish
Republic and other overseas government and corporation stocks.
The Stock Exchange does not fix dealing prices; the terms on which bar¬
gains are made between members reflect the interaction of supply and demand
for the securities concerned.