- Peel Hunt is urging ministers to tackle the ‘punitive level’ of taxation in Britain
- Reforms could boost shares and boost valuations of London-listed companies
- Panmure Gordon: ‘Very real negative economic impact’ caused by stamp duty
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Britain must cut stamp duty on share trading to revive the slumping stock market, leading City brokers say.
Peel Hunt urged ministers to tackle the “punitive level” of taxation in Britain as it sets out reforms needed to boost share ownership and boost valuations of London-listed companies.
Meanwhile, the head of research at Panmure Gordon warned of the ‘very real negative economic impact’ caused by stamp duty as it deters investment in UK shares.
The comments echo calls from the bosses of investment giants Abrdn, AJ Bell, Hargreaves Lansdown and Interactive Investor in The Mail last Sunday.
The call for stamp duty comes amid growing fears that low valuations have left London-listed shares vulnerable to predators looking to buy companies cheaply. Peel Hunt warned this week that the FTSE Small Cap index could disappear by 2028 due to the takeover ‘feeding frenzy’.
Warning: Peel Hunt urged ministers to tackle ‘punitive levels’ of tax in Britain as it sets out reforms needed to boost share ownership and boost valuations of London-listed companies to conduct
Separate figures show that investors have withdrawn money from British funds investing in London-listed shares for 34 months in a row, causing valuations to fall.
Investors pay 0.5 percent stamp duty on the price of UK-listed shares they buy – but the tax does not apply to the purchase of shares in foreign companies.
It means that a saver who buys £10,000 worth of shares in FTSE 100 giants such as Rolls-Royce or Marks & Spencer pays £50 in tax, but pays nothing at all to make the same investment in New York-listed Disney or Nvidia.
Charles Hall, head of research at Peel Hunt, said “addressing the UK’s criminal level of stamp duty compared to other markets” would revive the London stock exchange.
Simon French, chief economist and head of research at Panmure Gordon, added: ‘Countries around the world are locked in a scramble for investment to drive energy innovation, technology, infrastructure and life science research.
‘Stamp duty acts as a barrier to that investment coming into the UK stock markets. This has a very real negative economic impact on productivity and growth in UK plc.”
Abrdn chief executive Stephen Bird branded the tax ‘as unpatriotic as it is economically destructive’ and argued that ‘its abolition could be the biggest boost to British share ownership’.
Interactive Investor boss Richard Wilson warned ‘we are taxing the stock market into ending its existence’. The FTSE Small Cap Index – which is made up of UK main market companies that are not large enough to be part of the FTSE 100 or FTSE 250 – has seen its numbers fall from 160 in 2018 to 114 last year.
The numbers are expected to decline further, with transporter Wincanton, lender Virgin Money and housebuilder Redrow among the 12 companies that have agreed to takeover in the first quarter of 2024 alone.
Meanwhile, there were just £300m of new listings in London in the first quarter, compared to £4.3bn across Europe, meaning companies leaving the UK stock market are not being replaced.
“If we extrapolate the current trend line, the last company will leave the FTSE Small Cap in 2028,” said Peel Hunt’s Hall, adding that the pace of takeover activity was now “relentless”.