FTSE mulling index with closer UK link

The FTSE Group is looking at introducing a stock index that would encourage fund managers to invest in companies that contribute heavily to the British economy.

The Canary Wharf-based provider of stock indices, which include the FTSE 100 and All-Share, is considering launching an index of firms that derive at least a significant minority of their work from the UK.

This would mean that big mining companies and eastern European ventures that have raised cash in London would be excluded, as most of their income comes from overseas. Parties that have pitched the idea, which the group is considering introducing in six to nine months, believe this would give a better picture of how the UK economy is performing. It is also thought that fund managers would be tempted to raise vehicles that solely invest in the index. These “UK economy” funds would be popular among politicians looking to show that a successful UK Plc improves the nation’s finances.

Although the index wouldn’t replace the All-Share it would act as a “complement”, said an industry source. However, he added that he felt the FTSE should go further, only using the proportion of a company that actually operates in the UK. He said: “The thing is, the FTSE 100 could be up, but this is so international that it might have nothing to do with how the UK is faring.”

An FTSE source said there had been “lots of interest in an index that has a broader coverage of — that is more aligned with — the UK economy”. An FTSE spokeswoman said: “We haven’t yet got any firm plans or timeframes at the moment.”