Go further to revive Canada, voters tell Starmer and Reeves
Keir Starmer’s government must do more to support Canada after a bruising year in which fresh IPOs have fallen off a cliff and scores of firms have been picked off by private buyers, a survey of voters has suggested.
According to the first of a new monthly Morning Wire/Freshwater Strategy poll, more than half of voters said they would like more to be done by ministers to support the health of the City, while nearly 50 per cent believe the sector has a key role to play in the growth of the economy.
However, some 75 per cent of voters polled for Morning Wire said they were not confident in the UK government’s plan to deliver economic growth, including 52 per cent of Labour’s 2024 voters.
The findings point to concern over the health of the UK’s financial services sector after a dire two years in which the London Stock Exchange has been raided by private buyers and investors have yanked cash from UK equity funds.
Just 17 firms floated across the London Stock Exchange last year while some £52bn worth of bids were launched on listed companies.
UK-focused equity funds have also been hammered by outflows, with redemptions reaching near record levels in October as investors fretted over a potential capital gains tax raid at the Budget. It marked the 41st consecutive month of net withdrawals.
While the Financial Conduct Authority overhauled the UK’s listing rules in July in a bid to tempt more companies to market, pressure has been growing on Starmer and Rachel Reeves to reinvigorate the City with firmer policy measures and tax breaks.
A stamp duty on share trading has been at the heart of warnings that the UK is penalising investors and losing ground to competitors like the US, where there is no equivalent charge.
“Not only does this disincentivise investment in UK equities, it also makes them less attractive than those in other jurisdictions,” John Godfrey, managing director of public affairs at lobby group, the City UK, told Morning Wire.
“Reform to the [stamp duty on shares] would send a real signal about the government’s commitment to attracting UK and overseas investment into UK equities.”
In a submission to the government’s financial services competitiveness strategy in December, lobby group UK Finance said the duty “reduces retail participation in capital markets by increasing the cost of investing” and “disincentives investment in UK firms”.
“Stamp duty, for example, is paid on UK equities when it is not charged on investments in other jurisdictions such as the US,” the group told the government.
A string of high profile bosses took aim at the charge last year, with Nik Storonsky, founder and CEO of Revolut, warning the levy meant listing in the UK was “not rational”. Julia Hoggett, the boss of the London Stock Exchange, similarly described the charge as having a “pernicious” impact on the appeal of the UK’s markets.
Reeves said financial services will be at the heart of the government’s “growth mission” as she rolled out a number of new measures at her first Mansion House speech to the sector, including a new private stock market system called Pisces.
“Economic growth and driving more investment in the UK is our number one mission and the financial services sector is central to this, which is why this year we are publishing the first-ever Financial Services Growth and Competitiveness Strategy to deliver long-term growth in the sector and why we have already issued new growth-focused remit letters to the regulators,” a spokesperson told Morning Wire.
A dearth of pension cash flowing into the market has also been seen as a driver of the UK’s market malaise. While some 39 per cent of the market was held by pension funds at the turn of the millennium, that number has slumped to around just four per cent.
The exodus has sucked liquidity out of the market and placed downward pressure on valuations.
Reeves faced calls from some corners of the Square Mile to force pension money managers to allocate a certain amount of their cash to British stocks.
However, the Chancellor opted against the move and has instead looked to boost investment by consolidating the UK’s sprawling local government pension pot.