The Investment Association (IA) has called on the next government to scrap stamp duty on shares to help revive the fortunes of Britain’s beleaguered stock market.
Chris Cummings, chief executive of the IA, whose members manage funds worth £8.8bn, said the move was an “obvious” way to increase the attractiveness of UK shares.
He joins a chorus of city heavyweights who have called for the tax to be scrapped.
The tax charges investors 0.5 per cent when they buy UK shares, but nothing if they invest money in foreign companies.
Cummings told the annual AI conference in London that removing it could boost the market.
‘Unpatriotic’: Stamp duty charges investors 0.5% when they buy UK shares, but nothing if they invest money in foreign companies.
“An obvious measure would be the abolition of UK stamp duty on shares,” he said. “It is one of the highest in the world and the reform would bring greater attractiveness to the market.”
The tax is seen by many as a key factor in holding back the British stock market, after companies such as chip designer Arm and gaming group Flutter decided to list in New York.
London Stock Exchange boss Julia Hoggett has described it as “pernicious”, while former Abrdn director Stephen Bird has said it is “as unpatriotic as it is economically destructive”.
Some reforms are underway after City bigwigs persuaded regulators and ministers of the need to revive London’s fortunes, with listing rules overhauled and pension funds agreeing to allocate billions more to companies growing UK.
Cummings argued that “further reforms to the listing environment” were needed. “In a post-Brexit world, the UK needs to give a clear signal that we are open for business,” she said.
The comments come amid hopes that the UK stock market’s moribund period 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 division of consumer goods giant Unilever have also been named as potential UK IPO candidates.
Cummings argued that since the financial crisis, Britain had been affected by a subdued appetite for risk-taking. “We have moved too far toward a safety-first culture, taking the precautionary principle beyond what it was designed to do,” she said.
He added that in the late 1980s and 1990s there was a “powerful alignment” between capital allocation, regulation and the needs of the economy, with large pension funds heavily invested in UK shares.
“Thirty years later, our world looks very different,” he said. Investors have been able to buy more assets abroad.
“That has meant the UK has to struggle to justify its position in investors’ portfolios.
‘Over the last 15 years or so, UK shares have fallen from a third of assets under management to less than 10 per cent and I am concerned that figure is falling.
‘The combined “safety” culture and challenges facing the UK economy mean that these issues will not work during the cycle that needs to be resolved.
“It is 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.”