Recommendations to Boost Stock Investment

Lisa Gordon, chair of investment bank Cavendish and a member of the Capital Markets Industry Taskforce, is calling for the UK government to impose taxes on cryptocurrency transactions while reducing the tax burden on equity investments. The rationale behind this approach is to motivate young Britons to invest in local stocks, thereby enhancing the country’s sluggish capital markets.

“It should terrify all of us that over half of under-45s own crypto and no equities,” Gordon remarked in a report published by The Times on March 23. She emphasized her hope for a transition where the stamp duty on equities would be lowered while a similar tax would be applied to cryptocurrency transactions.

Current Tax Structure

As it stands, UK investors pay a 0.5% stamp duty on shares listed on the London Stock Exchange, which contributes around £3 billion (approximately $3.9 billion) annually in tax revenue. Gordon notes that alleviating this tax could encourage more investments in domestic firms, potentially leading to a surge in new public listings and energizing the British economy.

Moreover, she classified cryptocurrencies as “non-productive assets” that do not contribute to economic growth. “Equities provide growth capital to companies that employ people, innovate, and pay corporation tax. That is a social contract,” she stated.

Data from the Financial Conduct Authority (FCA) revealed that around 12% of UK adults—about 7 million people—possess crypto assets, predominantly among those under 55 years old. This demographic remains significantly underrepresented in equity ownership.

Financial Stability Concerns

Gordon expressed concern about the younger generation prioritizing savings over investments, a trend she believes could hinder long-term financial security. Although current tax regulations allow individuals to invest up to £20,000 each year without incurring taxes, only 38% of adults directly hold shares or manage accounts, while 70% opt to keep their money saved.

The FCA’s survey also highlighted the effect of the cost of living crisis, with 44% of adults reducing or ceasing their savings and investments, and nearly a quarter resorting to their savings or selling assets to manage expenses. The London Stock Exchange faces challenges, with only 18 new listings in 2023, down from 23 the previous year, alongside 88 companies changing markets due to low liquidity.

Gordon reassured that the UK remains a “safe haven” compared to other global markets amid the volatility seen in the US, which she claims stems from political uncertainty and economic challenges affecting both traditional and crypto markets.

Key Takeaways

• Gordon advocates for a tax on cryptocurrency while reducing equity stamp duty to enhance UK stock investment.
• Younger Britons show a preference for cryptocurrency and savings over equities, raising worries about their future financial stability.
• The UK market faces a decline in listings and an influx of delistings, despite being perceived as a secure haven.