Online Share Dealing

UK: 0.3m (2000); 0.6m (2001); 1.1m (2002) Germany: 1.8m (2000); 2.8m (2001); 4.0m (2002) France: 0.5m (2000); 0.9m (2001); 1.6m (2002) source: J.P. Morgan estimates

France too is ahead of Britain, and Italy is catching up fast.

According to a report by investment bankers J.P. Morgan, within three years there will be 17m people in Europe trading shares on the internet - but less than 2m will be in the UK, despite the fact that London is Europe's largest stock market, and one-third of all European shareholders are currently British.

UK bureaucracy

Those who compiled the report blame the fact that British investors still have to fill in paper forms to transfer shares when they buy or sell. They say that makes the whole process more expensive.

"We believe the archaic and expensive clearing and settlement system acts as a drag anchor on the development of the UK market," said Huw van Steenis of J.P. Morgan.

Another explanation may be that internet share dealing arrived just as many European countries were engaged in a wave of privatisation. As a result, the number of new shareholders has soared.

In Germany, retail share ownership grew by 25% in the first half of this year, while France added half a million shareholders in the same period.

A final problem for UK investors is the relatively low savings rate, and the high rate of owner-occupation, which means that many younger investors, who are more likely to use the internet, have less spare cash than in other European countries.

Dominant firms

According to the report, European firms dominate online share trading, except in the UK, with the top five online brokers accounting for 57% of the total market.

Consors, comdirect, DAB, Brokerage 24, and Bipop-Entrium are the top firms, especially in Germany, the largest market. Consors also has a strong position in France and Spain, while Bipop is the leading Italian online broker.

In the UK, however, US online brokers Charles Schwab, TD Waterhouse, and DLJ Direct have three of the top five spots, competing with Barclays and Sharepeople.