Time to revive UK markets

In the latest round of self-immolation over the state of the British stock market and the City of London, it is worth remembering the words of American author HL Minkin: “For every complex problem there is an answer that is clear , is simple and wrong ”.
It is easy to blame the stock market and – wrongly – argue that it has become a global recession. It’s easy to point the finger at the people responsible or the things behind it and come up with some easy solutions, but the problem with this approach is that the stock market is a symptom of Britain’s economic malaise, not the disease. itself not.
The fundamental challenges facing the UK market can be found on a much deeper level than the listing system or the norms of the country’s asset managers focusing on profit rather than growth.
Over the past 25 years, the number of UK publicly listed companies has almost halved and the number of new releases each year has dropped by about three-quarters “despite a welcome recovery in activity in recent years – and in terms of GDP, companies The UK market raised more money last year than the US raised. ”
The UK’s role on the world stage is declining with an increasingly analogue market and the rules unsuitable for a digital age, while the US and China are racing from afar. Technology stocks represent less than 2 percent of the UK market, compared to about 30 percent in the US.
Of course, the stock market is not an end in itself, it is a microcosm of the structural challenges facing the British economy and the City of London in the wake of Brexit and the pandemic. For this reason, the reboot of UK stock markets is one of the main focus areas in our report on The Future of UK Banking and Finance, published in partnership with the American think tank The Atlantic Council.
Public stock markets are at the heart of the UK’s financial markets, penetrating every corner of the economy, restoring the stock markets, and the rest will begin to return to normal.
What is immediately clear is that regulatory reform is an important starting point, but only a beginning. The UK should go further and faster than the roughly 30 government advice and reviews on various aspects of banking and financial services published over the past two years.
Ultimately, the question is, how do we reverse the vicious cycle and reconnect the stock markets and the City with the broader economy and society? To do this, we need to encourage more companies to start, expand, grow, list and stay in the UK. We need to involve UK investors – both institutions and individuals – to provide these companies with the capital they need to benefit the UK economy.
The UK may be blessed with a pool of £ 6 trillion of long-term capital over pensions, insurance and individual investments, but how can we encourage more of these investors to place more than 12 per cent of these scarce assets in the UK stock market?
How can we expand our participation in the UK stock market, when only 8 per cent of working age adults directly own individual shares? Last year, 20 per cent of UK adults bought an individual savings account in cash guaranteeing that they would lose money in real terms – but only one in 20 bought an individual savings account for shares and shares despite huge tax incentives.
How can we encourage more UK investors to invest more of their money in unlisted growth companies, when 90 per cent of the money raised by UK growth funds comes from outside the UK?
How do we reduce the tax difference between debt and equity financing, which means that equity investment is taxed four times “on the company’s actual profits, capital gains, dividends and stamp duty” while investing in debt is tax deductible?
How can we reduce the disclosure and governance gap between public and private markets when the UK has had more repetitions of corporate governance legislation over the past 25 years than it has prime ministers?
And how can we ensure that we are in a hurry to redesign the rules for post-Brexit, building resilient and forward-looking rules to embrace the relentless tendencies of cryptography and blockchain?
The UK has one chance in each generation to start over. The best time to address these issues was a few decades ago, before they took root. The second best time is now.
Founder and Managing Director of New Financial Capital Markets Research Institute

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