Autumn Budget: Reeves must cure British ‘pessimism’ disease
Ahead of the Autumn Budget, City Reporter Samuel Norman sits down with top industry names for a Budget Briefing. This week, chief executive of Peel Hunt urges Reeves to use the Budget to start the cure for British pessimism.
As Rachel Reeves ruminates over which tax prescription to write to fill her fiscal black hole, one City chief is calling for a radical treatment plan to cure an issue plaguing the country.
“Pessimism is a British disease,” says Steven Fine, chief executive of Peel Hunt.
In a speech on Tuesday that was widely viewed as a Budget preview, Reeves warned the country faced “big challenges,” despite her £40bn tax hike last year.
Labour’s last Budget caused a derailment in growth plans, Fine says, with the tax hike to employer’s national insurance helping “kibosh” future investment and the introduction of the Employment Rights Bill causing “a bit of a pause”.
But now, Fine is sending a rallying call for the Chancellor to administer the antidote of “economic nationalism” with a “sensible” Budget.
The investment bank boss has led calls to fix the “domestic self-esteem” issue hampering the London market.
“A sensible Budget that allows companies to plan, allows individuals to plan is what we’re crying out for.
“And I think we can do it.”
Stop championing capital exports
The sheer masses of domestic capital being exported abroad was a top issue on Fine’s docket.
“Why do we stand out on a global stage as being world class at exporting capital?” He questions.
In the 1990s defined benefit pension funds – workplace agreements that guarantee a set retirement income – had up to 70 per cent of their assets invested in UK equities.
However over recent decades this figure has quickly eroded over the years and accelerated after the 2008 global financial crisis.
Allocation to London-listed equities now makes up less than six per cent of defined benefit schemes.
This is dramatically lower than overseas rivals, where Australia at 45 per cent and Canada at 22 per cent have stronger loyalty to their domestic portfolios.
Fine is calling for “home bias” policies, adding plans for economic nationalism starting with “backing your own country”.
Reeves set out a voluntary, non-binding agreement with pension funds, dubbed the Mansion House Accord, earlier this year where at least ten per cent of all defined contribution funds – schemes where members and employers contribute – must be allocated into the UK private market.
Using the FTSE 100 as a “benchmark” would urge funds to “think about the UK market,” Fine says.
“There’s things you could do that sort of nudge or change behaviour without a threat of mandation.”
A meaningful ISA overhaul
Fine is also turning his guns on the cash ISA- an issue he notes is “sensitive”.
Reeves is expected to launch an overhaul on the cash ISA through slashing the tax-free limit when she takes to the dispatch box on 26 November.
But Fine is urging the Chancellor to go a step further through replacing the ISA tax-break with a fresh one on interest paid on mortgages for first-time buyers.
“Now that’s shifting the cash ISA break to an interest paid break… there has got to be something to explore with these sorts of things because you are helping a younger generation get on the housing ladder and dealing with a valuation gap (the widening distance between average house prices and average wages)” he adds.
Fine says the estimated £9bn annual cost of tax relief provided to savers was also subsidising the export of UK capital with ISA products not restricted to UK assets.
“We seem to think it’s perfectly acceptable to export all of our capital and lower the cost of capital of other companies, or help the debt portion of other jurisdictions buy their bonds and buy their company stocks.”
Though such a move would face opposition with building societies warning a slash to the cash ISA limit could damage the mortgage market.
In a report last month, the Treasury Committee echoed this, cautioning a reduction would mean a less competitive market for financial products and result in higher prices for consumers.
The stamp duty lever
One booster shot Reeves could administer to rejuvenate the ailing London stock market is axing the stamp duty on shares.
The London Stock Exchange has made a modest start to its bounce back in the fourth quarter of 2025 with a steady flurry of IPOs.
But a chorus of calls across the City have urged the Chancellor to pull the one lever that could reinvigorate the listing appetite for London.
The decision of Astrazeneca – the FTSE 100’s most valuable constituent – to upgrade of its US listing has meant as much as £200m has been lost from government tax receipts.
“I think it’s a horrible tax,” Fine says.
“Why have you got it on stocks and shares? It makes no sense whatsoever.”
Reeves is reported to be weighing a holiday to stamp duty, where newly-listed companies would be exempt from paying the tax for their first few years trading.
When asked whether it goes far enough, Fine responds: “It is the indicator they’re looking at stamp duty.”
He says it suggests “we don’t like it, we’re going to make this change, which then means you might tinker with it again next year.”
While recent signs have offered a sign of hope for the City market with the dual-listing of Fermi and IPO of specialist lender Shawbrook, it followed a year of woes.
London IPO fundraising slumped to a 30-year low this year with just £160m raised from five listings in the first six months of the year.
Fueled by a wave of delistings – both from takeovers and the notable loss of the £11bn fintech darling Wise – calls have intensified for the government to introduce market incentives aimed at blocking the flood of companies leaving the stock exchange.
While Fine hopes for a wholesale cure for British pessimism, Reeves might find some appeasement from the City if the Chancellor can at least stick a plaster on the flow of companies delisting and set a minimally corrective course for the market.