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The Treasury is set to give a stamp duty holiday to new London stock exchange listings in the wake of fears about the diminishing competitiveness of Britain’s public markets.
The measure would exempt investors from the 0.5 per cent tax on buying the shares of newly-listed companies in the UK, according to two people with knowledge of discussions for the UK’s November budget.
The exemption would likely apply for a period of two to three years after the company’s stock market flotation, the people said. There is already an exemption for shares at the point of issue in an initial public offering.
Officials hope that the move will boost liquidity and incentivise companies to list in London, rather than rival cities such as New York, as well as encouraging more retail stock investment in the UK.
City figures have been lobbying UK chancellor Rachel Reeves to help revive London’s moribund listings market, which this year has trailed the Angola, Zagreb and Muscat exchanges, according to Dealogic data.
The stamp duty burden has also been raised as a frustration by a number of financial technology firms that are considering where to float.
Charles Hall, head of research at Peel Hunt, said that removing stamp duty on new listings would “cost the government nothing to do it, because it hasn’t got the revenue today, and would really turbo boost things”.
Hall added that “stamp duty is a tax paid by ordinary investors, but not paid by high net worth individuals or hedge funds who use sophisticated contracts for difference or swaps instead”.
Mark Austin, partner at Latham & Watkins and a member of the Capital Markets Industry Taskforce, said: “Forgoing money that you don’t yet have is not too taxing on the brain cells or on the public coffers and would be a material incentive to list in the UK”.
The effort to revive the City’s status as a hub for capital raising comes amid a prolonged drought of listings.
In the year to September, $52.8bn was raised by companies listing on the New York Stock Exchange and Nasdaq combined, while just $210mn was raised from IPOs on the London Stock Exchange’s main and junior markets, according to Dealogic data.
London’s junior AIM market, which is exempt from stamp duty, has brought in $142mn from listings in the first nine months of this year, compared with $68mn on the main venue. Across Europe, Stockholm is the top venue for IPOs, with companies raising $2.9bn there.
The LSE has had a recent jolt of life with new planned listings from Beauty Tech Group and tinned food firm Princes.
Reeves announced at the Mansion House dinner in July that she would be backing a “tell Sid” style advertising campaign to encourage more Brits to buy shares, rather than keep their savings in cash.
The chancellor is also looking at ways to make it more attractive for entrepreneurs in particular to list their start-ups in London. Bankers have urged the Treasury to introduce a tax relief for entrepreneurs on proceeds from a London IPO, provided the business and director remained in London for a defined period.
City grandees, including CBI chair Sir Rupert Soames and Jupiter Asset Management chief executive Matthew Beesley, have urged for a full abolition of stamp duty on UK shares.
The CityUK lobby group has also advocated for a wholesale review of stamp duty, arguing that “no other country taxes domestic equity trading”.
However, the tax last year brought in £3.2bn for the Treasury, which is grappling with tight public finances and is expected to raise taxes at the November Budget to address a sizeable hole in its fiscal plans.
The Treasury said: “We’re making the UK the best place in the world for businesses to start, scale, list and stay, and the FTSE 100 continues to trade close to all-time highs.”
