TLDR:
- UK investment bank Cavendish chair Lisa Gordon proposes taxing crypto purchases instead of stocks
- Over half of Britons under 45 own crypto but no equities, which Gordon calls “terrifying”
- Gordon argues crypto is a “non-productive asset” while stocks benefit the broader economy
- The UK currently has a 0.5% tax on stock purchases, generating around £3 billion annually
- London’s stock market had only 18 new listings in 2023 while 88 companies delisted
Lisa Gordon, chair of investment bank Cavendish, is calling for a major shift in how the UK taxes financial transactions. Gordon wants the government to remove the current 0.5% tax on stock purchases and apply it to cryptocurrency transactions instead.
The proposal comes as the UK faces declining interest in its stock market. According to consulting firm EY, the London Stock Exchange had just 18 new company listings last year.
At the same time, 88 companies either delisted or moved to other exchanges. Many cited “declining liquidity and lower valuations” as reasons for leaving the UK market.
Crypto’s Growing Popularity
Gordon expressed alarm at the trend of younger Britons choosing cryptocurrency over traditional investments. “It should terrify all of us that over half of under-45s own crypto and no equities,” she told The Times.
The UK’s Financial Conduct Authority reported that crypto ownership has risen to about 12% of adults. This represents around 7 million people.
The majority of these crypto owners, about 36%, are under the age of 55. This growing interest in digital assets comes at the expense of stock ownership.
A 2022 FCA survey found that while 70% of adults had savings accounts, only 38% held shares either directly or through investment accounts. Among 18-24 year olds, around three in four held no investments at all.
Gordon frames her tax proposal as a matter of economic benefit. She describes cryptocurrency as “a non-productive asset” that “doesn’t feed back into the economy.”
In contrast, she argues that stock investments provide tangible benefits. “Equities provide growth capital to companies that employ people, innovate and pay corporation tax,” Gordon stated.
She believes this creates a “social contract” that the government should actively promote. The current stamp duty on shares brings in approximately £3 billion ($3.9 billion) in annual tax revenue.
Gordon suggests that shifting this tax burden to crypto could encourage more people to invest in UK companies. This could potentially stimulate more public listings and boost the broader economy.
Financial Literacy Concerns
The banking chair is also advocating for improved financial education. She worries that many Britons have “shifted to saving rather than investing.”
Gordon claims this approach “is not going to fund a viable retirement.” The cost of living crisis has further complicated the situation.
The FCA reported that in the 12 months to January 2024, 44% of adults either stopped or reduced their saving and investing. Nearly a quarter used existing savings or sold investments to cover daily expenses.
Gordon is a member of the Capital Markets Industry Taskforce. This group of industry executives aims to revive the UK stock market.
Cavendish would benefit from such a revival, as the investment bank advises companies on public offerings. The firm reported losses of £4.3 million in the year to March 2024.
Gordon described these as the “most challenging market conditions for 30 years.” Despite these difficulties, she remains optimistic about London’s market prospects.
She described the UK as a “safe haven” compared to other markets. Gordon specifically mentioned the US, which has experienced stock market losses due to recession fears and tariff concerns under President Donald Trump.
Investment Behavior Shifts
Gordon recalls the privatization of British Gas 40 years ago, which encouraged many ordinary citizens to buy shares through the famous “Tell Sid” advertising campaign. She hopes to see a return to such broad participation in the stock market.
The banking chair pointed to the 2023 Mansion House Compact as an important step. Under this agreement, pension funds committed to investing up to 5% of their assets in unlisted companies.
Gordon believes this could unlock up to £100 billion of fresh capital. She suggests pension funds should be required to make an “allocate or explain” disclosure about their investments in the London Stock Exchange.
Current Market Conditions
Both cryptocurrency and stock markets have recently experienced volatility. Bitcoin has traded down 11% over the past 30 days, struggling to maintain support above $85,000 since early March.
However, the digital currency has shown some recent recovery. In the 24 hours prior to reporting, Bitcoin rose 2% to trade at around $85,640.
A Bank of America survey indicated fund managers sold American stocks at the fastest-ever pace in March. At the same time, they made their highest allocation to London-listed shares since June 2021.
Despite this positive sign, Goldman Sachs analysis shows a long-term trend away from domestic ownership of UK stocks. In the 1980s, about 80% of London-listed shares were owned by domestic investors.
Today, that proportion has fallen to just 35%. This decline in local ownership presents another challenge for those seeking to revitalize the UK stock market.
According to the FCA, a quarter of 18-25 year olds and a third of 25-44 year olds held any investment in 2022. This represents a significant generational gap in investment behavior.
Gordon believes that redirecting interest from cryptocurrency to stocks would benefit both investors and the broader economy. She argues that investing in company shares provides better long-term returns than either crypto or cash savings.
The banking chair emphasizes that the stock market isn’t disconnected from the “real” economy. “Capital markets are there to provide growth capital to companies. It’s a virtual circle. They pay their tax and they employ people,” she stated.
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