In the 1980s and 1990s, FTSE investors made fortunes as UK PLC boomed. On December 31, 1999, the index peaked at an all-time high of 6,930 as euphoric investors looked forward to a bright millennium that never arrived.

The dot-com tech stock bubble burst in March 2000 and the FTSE 100 crashed by almost half over the next three years.

The 9/11 terror attacks, financial crisis, Covid pandemic, war in Ukraine, rocketing inflation and tensions with China have hammered confidence.

Over the last decade, UK shares returned a modest 72 percent, according to Morningstar data. That's better than cash but trails Europe which grew 110 percent while the US S&P 500 returned a stunning 267 percent.

At time of writing the FTSE 100 has slipped to around 7,500 and even Stocks and Shares Isa investors are giving up, pulling a massive £40billion out of UK equity funds in the last seven-and-a-half years.

A decade ago, UK shares made up nine percent of global stock market indices. Today, that has been reduced to just four percent.

The FTSE 100 is shrinking faster than Lurpak butter, Whiskas cat food pouches and Penguin biscuit multi-packs.

Yet Laith Khalaf, head of investment analysis at AJ Bell, reckons that giving up on the UK now may be a big mistake.

It could be due a return to form.

Both the FTSE 100 and FTSE 250, which invests in medium-sized companies, actually grew in July, Khalaf says.

The FTSE 250 jumped four percent in a day after June's inflation figure came in lower than expected at 7.9 percent.

Investors saw that as a boost for the UK economy, allowing the Bank of England to slow the pace of base rate hikes.

July’s inflation figure is expected to register an even bigger drop as last year's energy price spike falls out of the annual figures.

If that happens, it could send an electric charge through UK shares. We'll see when the figure is published on August 19.

Khalaf says recent disappointing performance could make now a good time to invest in UK shares, because they're so cheap.

The average FTSE company trades at just 12.7 times its annual estimated annual earnings. In the US, firms trade at 18.5 times earnings, according to Refinitiv data. "By that measure, UK valuations look attractive,” Khalaf says.

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The US stock market has rebounded strongly so far this year but that has been driven by just a handful of overhyped tech stocks dubbed the magnificent seven.

It could be heading for a fall.

Khalaf is far from the only expert to anticipate a recovery in UK shares, plenty more see great value in our shrinking stock market.

Victoria Scholar, head of investment at Interactive Investor, says investors need to be brave, though. "Often the best time to buy shares is when they are down rather than up."

But here's a word of warning from Ed Monk, associate director at Fidelity International. “Just because UK shares are cheap, doesn’t make them good value. Much depends on whether companies can deliver earnings and valuations can begin to recover.”

Given the gloom descending over the UK economy, the FTSE 100 could take time to prove it's worth and really start growing.

Until then, it's worth remembering that shares listed on the index pay some of the most generous dividends in the world, with a forecast yield of 4.4 per cent next year.

The FTSE 100 doesn't offer much growth, but at least investors get some income. Better still, dividend yields are rising rather than shrinking.