- The Capital Markets of Tomorrow report is aimed at revitalising the UK investment landscape.
- The document from the Capital Markets Industry Taskforce* puts retail investors front and centre of future plans.
- Retail share ownership levels among UK households has more than halved over the past 20 years.
- Research from HL shows that too many people are sitting on excess cash savings which could be deployed in the economy and delivering longer term returns
*The UK Capital Markets Industry Taskforce (CMIT) comprises CEOs, chairs and industry leaders representing private and publicly listed companies, asset owners and managers, and advisory services that support their access to capital and investments.
Susannah Streeter, head of money and markets, Hargreaves Lansdown:
‘’It’s clear there is a great deal of work which needs to be done to boost investment in London listings and help power up economic growth. This report makes some helpful suggestions on revitalising the UK investment landscape to help lay the groundwork for long-term expansion.
Retail investors are enthusiastic holders of UK equities, helping provide the capital for companies to expand. Of those equities held on HL’s platform, 80% of the trades in the last year were on the London markets. But greater efforts need to be made to encourage more people to start investing.
As the report points out, Britain has had a strong tradition of pensions savings and direct retail investment in shares. This peaked with the privatisations of the 1980s and 1990s and continued through the dotcom boom of the early 2000s. But it’s shocking to see that retail share ownership levels among UK households have more than halved over the past 20 years.
Research from HL shows that too many people are sitting on excess cash savings, which could be deployed in the economy and delivering longer term returns. Our latest Savings and Resilience Barometer into the efficient use of money from April 2024 shows that over 12 million households have excess cash savings. These could be redeployed to pensions and investments which have the potential to deliver higher returns.
In many ways, it's not surprising people have been turned off from dipping their toe into investing. All too often they have been left out of initial public offerings on the stock market, only able to get a small foot in the door after institutional investors have taken their pickings. Time after time retail investors are left disappointed by the their small allocation in IPOs. HL was significantly oversubscribed for the Raspberry Pi IPO, which only allocated €8million to retail investors. This shows there are still matters on the supply side to fix. It’s heartening to see that retail investors will be pushed more towards the centre of future plans through the FCA’s proposed reforms of the listings and prospectus regime.
Tax wrappers like ISAs and SIPPs make all the difference to people building their pots for the future and for major events in their lives. ISAs are part of the furniture – in a good way. They’ve been around for 25 years and are well established and well loved. Of course, like anything we’ve been wedded to for 25 years, we can always think of ways they could improve. But while small changes would be welcome, its essential they do not over-complicate the landscape and that tax-free allocations are either increased or at the very least maintained.
What would also help simplify retail investing and encourage more people to take the plunge into the stock market is reducing the Lifetime ISA (LISA) penalty from 25% to 20%. The 25% penalty not only claws back the government bonus to save, but also applies an additional 6.25% penalty based on the net amount invested. It would give investors more confidence to use this highly useful tax wrapper to climb onto the housing ladder or save for retirement with the knowledge that they won’t be penalised if their circumstances change.’’
