This week marks the 40th anniversary of the FTSE 100. Since its launch, the index has tracked the fortunes of the 100 largest companies listed on the UK stock exchange and remains the leading such list in the UK. It is seen as a key indicator of the country’s economic performance and most CEOs aspire to count their company among its ranks. 

Prior to 1984, the Financial Times’ FT 30 was the primary index for stocks and the 30 companies that featured on it were decided on by the paper’s editors. With the shift to electronic share dealing, demand grew for a new index that provided regular updates to allow for intra-day trading. 

“With the launch of traded options, London needed an index that was continuously updated during market hours and more representative of the London stock market,” says John Spiers, the founder of Bestinvest and chair of EQ Investors who was working as a stockbroker at the time of the footsie’s launch. 

As a result, the SE 100 (as it was initially known before the Financial Times succeeded in getting its initials on the name of the index) was devised, which would give updates every minute. Launched on 3 January 1984, the FTSE 100 started with a benchmark of 1,000 points and has now risen to a little over 7,682. 

Professor Elroy Dimson, former chair of the policy and advisory board of FTSE Russell, said of the creation of the new index: “Paul Marsh and I helped design the FTSE 100 Index as a liquid reference benchmark for equity index futures and options contracts. When we launched it in January 1984, we had no idea it was going to be such an enormous success.”

The initial response to its launch was “very positive”, according to Spiers. “With markets generally booming in the 1980s and 1990s plus the hugely popular privatisations of that period the FTSE 100 quickly became a household term,” he adds.

During its 40 years it has ridden several market scares, including the Black Monday stock market crash, the global financial crash of 2008 and the aftershock of the Covid-19 pandemic.

Where are the original FTSE 100 companies now?

Although many of the names of the original constituents are unknown to most today — including the now defunct Hawker Siddeley Group and Midland Bank, which was acquired by HSBC in 1992 — 29 of the original 1984 cohort are still in the FTSE 100, in one form or another. 

Barclays, Marks & Spencer, Prudential, Rio Tinto and Unilever are some of the original blue chip companies that still hold that status (although some, such as Marks & Spencer, have dropped out and made a return during those 40 years). Only three of the original 100 (British & Commonwealth, Ferranti and MFI) have gone bust in the intervening period.

Tracking the fortunes of many of these businesses is challenging due to renamings, mergers, splits, acquisitions and subsequent sales of many of them. For example, since Plessey, an electronics, defence and telecoms company, was first listed on the initial FTSE 100 it has been taken over by a consortium, had its assets split and was then resold. It technically still retains its place in the FTSE 100 as its defence assets were amalgamated into BAE Systems.

The top performers over this 40 year period are British American Tobacco, Relx (first listed as Reed International) and mining company Rio Tinto, which would have returned shareholders an annual compound rate of 16.4%, 14.4% and 13.8% respectively, if any dividends were reinvested.

This far outstrips the average annual return on the entire FTSE 100, which stands at 5.2%. However, William Meadon, managing director at JPMorgan Claverhouse Investment Trust, believes this underplays the true performance of UK listed companies, as it does not take account of dividends that could be reinvested. With dividends and exchange rates adjusted for, the FTSE 100 has delivered an annualised 8.6% return. 

There has been more recent concern that the FTSE 100’s influence is waning, with a number of companies, such as Tui, mulling leaving the London stock exchange and the likes of Arm opting to list in New York. However, Meadon adds: “All indexes evolve. As takeovers occur, and as technology develops and investment styles change, companies will get promoted or demoted and the FTSE 100 is no different.”

Find out more about the leaders behind the FTSE 100 companies here.