TLDR:
- UK government urged to review 0.5% stamp duty on share purchases
- Barclays recommends tax breaks to boost London equity market
- Calls for smoother transition from junior to main market listings
- Proposal to extend tax reliefs for investors in companies moving to main market
- Suggestions aim to make London more attractive for listings and increase liquidity
The UK’s financial landscape is facing challenges as its stock market struggles to maintain its global appeal.
In response, Barclays Plc has put forward a series of recommendations aimed at revitalizing London’s equity markets and attracting more listings.
These proposals, outlined in a report published on Monday, September 16, 2024, focus primarily on tax reforms and regulatory adjustments.
At the heart of Barclays’ recommendations is a call for the UK government to review the stamp duty reserve tax (SDRT), a 0.5% levy on share purchases on the main London Stock Exchange.
This tax, which raised £3.8 billion for the Treasury in fiscal 2023, has been identified as a potential barrier to increased market liquidity and attractiveness for listings.
The bank argues that eliminating or reducing this tax could significantly boost trading volumes and make London a more competitive listing venue
. This suggestion comes in the wake of several high-profile companies, such as CRH Plc and Flutter Entertainment Plc, choosing to move their listings to New York, partly due to higher valuations in the US market.
Barclays also proposes creating a smoother transition for companies moving from junior markets like the Alternative Investment Market (AIM) to the main market.
The bank suggests extending tax reliefs enjoyed by investors in AIM-listed companies for a limited period when these businesses switch to the main market.
This approach aims to create what Barclays calls a “positive glide path” towards the main market, encouraging growth-stage companies to list on junior markets with a clear pathway for future progression.
Another key recommendation is to remove the requirement for a company to publish a prospectus when moving to the main market if it has been listed on a junior market for at least 18 months. This change would reduce administrative burdens and costs for companies looking to upgrade their listing status.
The proposals come at a time when the UK is battling to make its equity market more attractive and combat a trend of companies choosing to list overseas or go private. Recent data shows that investors continue to withdraw hundreds of millions of pounds from UK-focused equity funds each month, highlighting the urgent need for reforms.
Katharine Braddick, Barclays’s head of strategic policy, emphasized the importance of these changes, stating,
“Removing unnecessary frictions for high growth companies looking to graduate into main markets would drive dynamism and agility within UK capital markets.”
The recommendations from Barclays align with similar calls from the Capital Markets Industry Taskforce earlier this month, indicating a growing consensus within the financial sector on the need for reform.
These suggestions also follow recent efforts by British regulators to overhaul listing rules to improve London’s prospects as a listing venue.
However, implementing these changes, particularly the reduction or elimination of the stamp duty on shares, would come at a significant cost to the UK Treasury.
With the Labour government’s first budget due next month and Chancellor Rachel Reeves warning of “painful” decisions to repair public finances, it remains to be seen how these proposals will be received.
The report also touches on the need to tailor rules for junior market companies as the UK replaces EU laws kept in place after Brexit, suggesting a broader approach to improving the competitiveness of UK capital markets across all levels.
