Record highs predicted for FTSE

Britain's leading share index marks its 30th anniversary today as forecasts suggest it will reach record highs in the year ahead.

699ef52c-73b4-11e3-8cd9-0a0c0223000020140103T172717
A man walks past information screens at the London Stock Exchange in the City of London which show the FTSE 100 index.

Britain's leading share index marks its 30th anniversary today as forecasts suggest it will reach record highs in the year ahead.

The FTSE 100 replaced the FT30 as the main indicator for the performances of companies listed on the London Stock Exchange on January 3 1984.

Today, the combined value of its constituents stands at £1.87 trillion, more than 10 times higher than the market capitalisation total of £164 billion in December 1985 - the first available data.

The index has weathered the miners' strike, the Big Bang of market deregulation in 1986 and the Black Monday crash of 1987, as well as the 1990's dotcom boom and the financial crisis in more recent years.

But just 30 of the original companies remain on the list, which is composed of the 100 biggest London-listed firms by market value.

Only 19 have remained in the index for the entire three-decade period - including oil giant BP, retailer Marks & Spencer and insurer Prudential.

Big names that have dropped out, been broken up, or bought out, include Imperial Chemical Industries, GEC and Scottish & Newcastle breweries. Others that have joined since include BT, Vodafone and Royal Mail.

Many of the others now on the list have operations largely based abroad, meaning the performance of the index is often more heavily influenced by world economic currents than the domestic scene.

The FTSE 100 was founded with a base level of 1,000 in 1984. It reached an all-time closing high of 6930.2 at the height of the dotcom boom on December 30, 1999.

Its biggest one-day rise, of 9.8%, came on November 24, 2008 as the index bounced back from a five-year low during the financial crisis.

The steepest fall came on October 20, 1987, when it plunged 12.2% following a wave of panic selling across the Atlantic on Wall Street - that became known as Black Monday.

On an annual basis, the biggest rise was in 1997, when it rose nearly 25%, and the heaviest plunge was in 2008, when the index fell 31%.

It reached its lowest level of the last five years on March 5, 2009, sliding to 3529.7 as the Bank of England slashed interest rates to their current low and started pumping billions into the economy amid the dark days of recession.

By the end of the year, however, the FTSE 100 had jumped 22% as the stimulus measures began to take effect.

Earlier this week, the index notched up its biggest annual climb since then, ending 2013 at 6749.1 points, 14% up on the end of 2012.

Shares have been boosted by stimulus policies which have kept interest rates and yields on government bonds low, leaving investors to seek better returns in the equities market.

Economists and fund managers predict it is now likely to reach an all-time closing high during 2014, breaking through the 7,000 barrier.

But the comparison with previous record highs is not straightforward in investment terms as company dividends paid out on shares have not grown at the same pace.