- Critics say it will benefit only the wealthiest.
- And that adds to the complexity of the once simple Isa system.
- The potential disadvantages are outweighed by the fact that it will encourage private investors.
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Poor Jeremy Hunt. As if it wasn’t bad enough to be called a drag queen prosecutor on Radio 4, pundits were quick to criticize the great British Isa of him.
Critics say it will benefit only the richest and increases the complexity of the once simple Isa system.
But these potential disadvantages are outweighed by the fact that it will encourage private investors – and perhaps even big city fund managers – to take a fresh, less critical look at UK plcs.
Contrary to the prevailing narrative that the UK market is broke, there are plenty of stocks to put into a Great British Isa.
Last week I was surprised by the contrasting fortunes of telecoms testing group Spirent and pie maker Geordie Greggs.
Undervalued: Contrary to the prevailing narrative that the UK market is broke, there are plenty of stocks to put in a Great British Isa.
In line with the view that British companies are at the bottom, an undervalued Spirent has succumbed to a bid from a US rival.
At the same time, Greggs, a quintessentially British company that has made billions from the simple proposition that people like cakes, posted 27 per cent growth in profits. Its shares have risen nearly 60 percent in five years, or about 4,700 percent since 1993.
Ok, we can make cakes, but the UK is useless at technology, according to our detractors.
But another Tyneside company, software group Sage, is up 64 per cent in the last 12 months. Cybersecurity group Darktrace, which has suffered from its association with Mike Lynch, the tycoon currently facing fraud charges in the United States, is being re-evaluated and has seen its shares rise 45 percent in the past year.
Longtime defense champion BAE Systems was trading at a discount to its American rivals.
It is closing that valuation gap, not only because of the war in Ukraine but also because of better performance, lower debt and a shrinking pension fund deficit.
Then there’s Melrose, which traditionally made money by buying unappreciated industrial assets, improving them, and selling them at a profit.
More recently, it has reinvented itself as a purely aerospace business: Last week it announced it had doubled its profits and expects bigger than previously thought profits in 2024. Shares are up 71 percent last year.
On the fashion front, Next has been consistently strong. After a torrid period, M&S has risen 50 per cent in the past year and has returned to the elite FTSE 100 index.
Jeans and Jaeger coats are so good they threaten my creditworthiness. None of this is intended to be stock advice, but simply to illustrate the fact that there are many attractive companies listed in the UK that can be bought at decent prices.
And a point that is often overlooked when comparing the UK with the US is that a large part of the return on British shares comes from dividends.
As for Isas only helping the rich, my own investing career began when I was a miserable young journalist. I resisted the temptation to sell free shares in a couple of old building societies and instead put them in a Pep, the precursor to today’s Isa.
Little by little the dividends arrived, which I invested in other stocks to diversify and put in extra money when I could. Over the years, it has gradually grown to a respectable sum.
Coupled with the takeover bid for NatWest (some free shares for taxpayers who bailed out the bank would be nice), Britain’s big Isa could inspire a new generation of investors.