Rachel Reeves has been warned she risks ‘taxing the UK out of existence’ after a string of budget tax hikes caused a mass exodus from the London Stock Exchange.
The Financial Conduct Authority (FCA) set out plans for a new private stock market system this week, in an attempt to encourage more businesses to list in the UK and stop an exodus that may have cost the UK economy £100bn already.
In a consultation document, the City watchdog said the new stock market system, PISCES, tabled by the previous government and confirmed by Rachel Reeves at Mansion House in November, would allow investors to take stakes in private companies and therefore help fund more UK start ups.t.
The FCA said: “A world-leading innovation in private markets, PISCES could provide opportunities for more diversified returns for investors.”
But Richard Wilson, chief executive of interactive investor said while the plans may go some way to encouraging more firms to stay in the UK the government was “taxing the UK stock exchange out of existence”.
Wilson adds: “We tax every purchase on the main London market at 0.5 per cent, a tax otherwise known as the stamp duty reserve tax.”
“This is a staggering 2.5 times higher than the equivalent levied in EU countries, and our main competitor, New York, charges nothing.
“As we have said time and again, markets live or die on flow, and the stock market today has become untradable. This impacts depth and valuations and leads to those who can list elsewhere, mostly growth businesses, doing so. What is left is mostly legacy industries who will eventually expire or move.
“If UK plc wants to support entrepreneurs and retain its great talent base it must support its financial markets. If the market dies, then growth and with it ultimately our standard of living are sacrificed.”
Wilson added that investors also suffer, as stamp duty is a huge barrier to investing.
“Recent research we conducted found that nearly four in ten investors had decided against investing in UK shares in the past because of stamp duty. Additionally, the majority claimed that the tax would make them think twice about investing in UK shares in the future. How can we encourage investors to ‘buy British’ when they are penalised for doing so?
“So far, these arguments have failed to convince the politicians to care. Most of them have no clue what financial markets do or why they matter. They think it’s just self-serving rich people playing with their money, it’s easy to count the tax and doesn’t win any votes. These are ‘cloth ears’ to fit the size of the proverbial elephant.
“We urge the Government to recognise the scale of this problem and act decisively. This isn’t just for the health of our markets, but for the health of the UK economy. It is a lose-lose tax. We simply can’t afford not to fix this issue.
“It may not be too late. By removing stamp duty, we can restore the UK’s position as a global financial leader, attract businesses back to our markets, and create opportunities for both companies and investors. But time is nearly up.”
