Barclays has backed a review of stamp duty on share purchases in a bid to “revive” the UK’s flagging stock market.
In a report on Monday, the bank argued that a variety of changes were needed to make London “internationally attractive”, as well as encouraging unlisted companies to float on the UK’s main market.
The City has heavily campaigned for the stamp duty reserve tax to be abolished in recent months, after it was scrapped for junior market transactions in 2014.
The 0.5 per cent levy raises about £3.8bn a year for the Treasury, but a report from earlier this year from consultancy Oxera found it could increase investment in the FTSE by up to £6.8bn annually.
“Considering the effects that removing stamp duty has had on liquidity and investor demand for junior market stocks could provide insight into the positive effect that could be had if it were removed from transactions on main markets,” the bank said.
“While great strides have been made to enhance policy frameworks in recent years, our research shows there is more that can be done,” added Katharine Braddick, group head of strategic policy at Barclays.
“Removing unnecessary frictions for high growth companies looking to graduate into main markets would drive dynamism and agility within UK capital markets.”
Overall, Barclay made five suggestions that could boost the London Stock Exchange, focusing especially on changes that could smooth the transition for companies moving to it from junior markets, like Aquis and AIM.
These included removing the requirement for a prospectus for admission to a UK regulated market for companies if it has been listed on a junior market for at least 18 months, as well as removing the ‘cliff edges’ that exist for companies moving between them and the main market.
This could involve sustaining the tax incentives currently provided for unquoted and unlisted companies, such as through Enterprise Investment Schemes and Venture Capital Trusts, when they graduate from a junior market to a senior market, for a limited period of time.
“The alleviations from inheritance tax and capital gains tax are seen as particularly powerful in relation to founder-led companies,” Barclays said.
With these cliff edges in place, unlisted companies are hesitant to graduate to a main market, as they risk losing “what might be a significant part of their investor base”.
Rhiannon Price, director of policy and strategy for capital markets at Barclays, added: “Our research shows that while both junior and main markets are effective at helping companies with capital raising and providing liquidity and volatility, certain areas of the junior markets are not meeting the needs of companies.
“A problem which we believe could be resolved with a smoother pathway for companies to graduate to main markets.”