Britain’s next government should scrap ‘unpatriotic’ stamp duty on shares to help revive the investment in home grown businesses, according to industry leaders.
The move is being promoted by the Investment Association (IA) and City investment chiefs whose members manage funds worth £8.8 trillion.
The IA’s chief executive, Chris Cummings, said it was the “obvious way” to usher in a new era of investing in British business, while boosting returns for ordinary investors and pension pots.
Mr Cummings said the UK needs to put investment “front and centre” in the pension scheme market with greater incentives designed to ensure people save enough to enjoy a decent standard of living in retirement.
The tax charges investors 0.5 per cent when buying UK shares but nothing if they put money into foreign firms.
Mr Cummings told the IA’s annual conference in London: “One obvious measure would be the abolition of UK stamp duty on shares. It’s one of the highest in the world and reform would bring greater market attractiveness.”
The tax on shares is seen as one of the reasons that the London Stock Market has underperformed others around the world, particularly in the USA.
As a result, a number of big companies have decided to list in New York where they are able to attract higher valuations for their shares and greater investment.
London Stock Exchange boss Julia Hoggett has described it as “pernicious” while former Abrdn chief Stephen Bird has said it is “as unpatriotic as it is economically destructive”.
Some reforms are under way after City grandees persuaded regulators and ministers of the need to revive London’s fortunes, with listings rules being reformed and pension funds agreeing to allocate billions more to UK growth companies.
Mr Cummings argued that “greater reforms to the listings environment” were needed. “In a post-Brexit world, the UK needs to signal clearly that we are open for business,” he said.
The comments come amid hopes that a moribund period for the UK stock market is coming to an end. Chinese retail giant Shein could file papers for a £50bn initial public offering (IPO) in London this week.
Diamond firm De Beers, retailer Boots and the ice cream arm of consumers goods giant Unilever have also been named as potential IPO candidates for the UK.
Mr Cummings argued that since the financial crisis, Britain had been hit by a risk averse approach to investment.
“We’ve moved too far towards a culture of safety first, taking the precautionary principle beyond that for which it was designed,” he said.
He added that in the late 1980s and 1990s there had been a ‘powerful alignment’ between the allocation of capital, regulation, and the needs of the economy, with big pension funds heavily invested in UK shares.
“Fast forward 30 years and our world looks very different,’ he said. Investors have been able to buy more overseas assets.
“That has meant the UK’s got a fight on its hands to justify its position in investor portfolios.
“Over the last 15 years or so, UK equities have fallen from a third of assets under management to under 10 per cent and I’m worried that figure is coming down.
“The combined culture of “safetyism” and challenges facing the UK economy mean these issues will not work through the cycle to be resolved.
“It’s simply time to rethink the industry and regulatory approaches that support today’s investors, otherwise tomorrow’s investors will not be interested in our industry.”