We need to do more than just scrap stamp duty to drive investment in the UK
There is a growing number of voices calling for the removal of stamp duty on the purchase of equity or shares.
However, the removal of stamp duty is just one of many levers that could be pulled to generate additional investment in the UK’s markets.
This proposal, and many others, tends to address two things: the cost of buying shares and the ease of doing so. What we have not yet addressed is arguably one of the more difficult puzzles to crack – the aversion to risk and quest to eradicate it from our system.
Creating more interest in equity markets should generate additional sources of investment and liquidity for a company issuing shares. Retail investors are also not all “day traders” and many are incredibly loyal. For the holder of the shares, it’s the chance for wealth at a future point in time as well as offering some “skin in the game” in UK plc.
As a nation we are more comfortable storing our cash in savings, rather than investments. Earlier this year, our analysis found that we have £3.4tn sitting in UK deposit accounts. What if we unlocked even £500bn of this money and put it to work in UK growth companies?
We lag our international peers in access to equity too. UK households hold just 10.6 per cent of their financial assets in equities, compared with 36.2 per cent in the US and 22.7 per cent in France. We are more likely to see housing than shares as a way of generating long-term wealth. And the opportunity of creatingwealth via property is obviously not available to everyone.
We are heading for a future generation dependant on savings and pensions which will fall drastically short of what we need to maintain living standards.
Research has shown that retail investors don’t always have the information they need, or indeed the confidence, to successfully participate in the UK’s capital markets. This is important as individuals will increasingly need to take greater personal responsibility to safeguard their financial futures.
There are murmurings of a shakeup of the ISA regime to get more savers investing in the stock market. This is important, but over and above this we need to engage people at an early age to encourage sensible investing in the pursuit of reward as part of a long-term strategy.
The All-Party Parliamentary Group on Financial Education for Young People report found that two-fifths of teachers, who have a statutory duty to deliver financial education, weren’t aware that it is a national curriculum requirement. This has to change.
Engaging educators, schools and creating industry-supported events, alongside public information campaigns, would be a powerful way to educate the next generation preparing for their financial futures. Talks by successful founders and other local success stories would improve our understanding of business, the balance of risk and reward and the path to success. Let’s champion and celebrate our entrepreneurs – a group of people who know much about taking risk for future reward.
Capital markets drive modern economies. They channel the investment and lending that can turn a start-up into a household name. They facilitate our mortgages, savings products, and our pensions. The UK is facing several challenges to its position as a leading global capital market, but these are challenges that the industry is more than ready to meet. Getting to the heart of these issues will be important for all of us.