Cavendish chiefs: Markets need tax incentive to turn heads
The bosses of investment bank Cavendish have joined calls to use more attractive tax policy to boost market listings, amid a waning backdrop for the London Stock Exchange.
The London-listed company swung back into profit on Wednesday, but did so battling against woeful mergers and acquisition volumes.
Takings from M&A slumped 55 per cent on the back of depleted conditions, but a 23 per cent rise in equities issuance helped offshore the hit.
John Farrugia, co-chief executive of Cavendish, told Morning Wire: “If you want to attract the best assets onto public markets you need to incentivise your entrepreneur”.
Farrugia said a “good tax break” was needed to “turn [entrepreneur’s] heads”.
The investment banking’s chief said these moves would be crucial to avoid firm’s “falling to the hands of private equity”.
This followed a flurry of deals hitting the London market as private equity giants eyed cheap stocks.
Industrial group Spectris agreed to a £3.8bn takeover by US private equity Advent on Monday – though a bidding war with peer KKR may loom.
Several City bosses have led calls for tax clarity in order to improve market sentiment.
Steven Fine, chief executive of Peel Hunt, previously told Morning Wire: “There are a lot of levers at our disposal that we could pull that either wouldn’t cost the exchequer a bean or could significantly move the dial on the mindset of people you want to commit to growth in the UK.”
Fine also called for the restoration of dividends tax credits for pension funds investing in UK equities, which were abolished in 1997, as well as for entrepreneurs relief on capital gains tax for business owners who sell shares via an IPO.
Farrugia highlighted a “small re-adjustment” to allow trapped capital in pension funds to invest into equities would give a “really good boost” to both private and capital markets.
Cavendish: Investors ditch Mag Seven
Cavendish noted in its full-year results that the UK was set to benefit from a “rotation out of US assets”.
Julian Morse, co-chief executive of Cavendish, said the movement of funds across the Atlantic had already begun.
“March was the largest sell off, or rotation, from US assets with European funds selling US assets to buy European,” Morse explained.
“It has happened and I think it’s going to happen”.
The volatility stemming from US policy, namely President Donald Trump’s erratic tariff agenda, has helped dampen confidence in Wall Street and led to investors flocking away.
Deutsche Bank warned earlier this year global markets had “lost faith in US assets” and were seeking refuge elsewhere amidst the fallout of Trump’s ‘Liberation Day’ levies.
Morse said the Magnificent Seven – which refers to a group of high-performing, influential technology stocks listed in the US – had acted as a “black hole sucking in the capital from all over the world but that’s started reversing”.
Tech firms were crucially hit in the post-Liberation Day sell-off, with the Magnificent Seven shedding over $1.8tn in market value in the span of 48 hours.
Cavendish said the released capital was set to contribute to a boosted sentiment across UK equity markets.
Morse said whilst it would “take time to come through” they were seeing the benefits small and mid-cap as well as the listed giants.