ISA reform and stamp duty relief are sticking plasters for a stock market that needs major surgery, writes Tim Focas
The government wants you to believe this Budget marks a turning point for UK capital markets. The rhetoric from the City minister is confident, the narrative upbeat and the headline reforms couched in the language of revival. But scratch beneath the surface and the package is far too cautious for an economy that has spent the past decade watching its global competitiveness slip away. This is less a reboot of UK capital markets and more a light dusting of the keyboard.
Take the much-trailed UK listing relief. Removing Stamp Duty Reserve Tax (SDRT) for three years after listing sounds exciting, but it is a temporary sweetener rather than a structural incentive. Over the past few years, the problem has not been a shortage of incremental tweaks. The problem has been a lack of radical reform. Companies do not choose a listing venue on the promise of a short-term tax holiday. They choose one based on the long-term credibility of the regulatory and investment culture. The UK still suffers from a chronic valuation gap compared to the US, and nothing in this measure changes that. SDRT relief is a gesture when what the market needs is genuine free market ambition.
The same goes for ISA reform. Encouraging retail participation is important, but the premise that ISA flexibility alone will unleash a wave of domestic capital into UK equities is optimistic at best. Retail investors have not been absent because of lack of wrappers. They have been absent because UK equities have failed to deliver compelling returns relative to global alternatives and because the regulatory environment has made investing feel unnecessarily complex. Raising the ISA allowance may help at the margins, but without genuine supply-side reform to make UK equities more attractive, these are small steps politically dressed up as transformation.
The Budget’s broader message is that the UK is already a strong marketplace that simply needs a few targeted adjustments. Yet this overlooks the uncomfortable reality that London has lost ground as a listings destination, private markets are ballooning while public markets shrink, and institutional capital continues to drift offshore in search of scale and liquidity. The government may cite record FTSE highs and strong aggregate capital raising, but these stats obscure the deeper structural erosion. The real issue is the hollowing out of growth listings, the decline in research coverage, and a regulatory approach that has prized caution over competitiveness.
Where the Budget should have gone much further is in dismantling the barriers that suppress liquidity and depress valuations. The UK needs fundamental reform of its pension system to reverse the retreat from domestic equities. It needs a much lighter touch regulatory framework that consistently rewards risk-taking, innovation and capital formation rather than defaulting to defensive supervision. It needs a listings regime that is not just simplified but genuinely compelling, with clear incentives for global firms to anchor their growth here. And it needs a coordinated strategy across treasury, regulators and industry rather than a patchwork of isolated measures.
Scale-ups will welcome the nods to talent incentives and British Business Bank capital, but even here the ambition feels constrained. The high-growth companies deciding whether to scale in Britain or move abroad are responding to global competition, not esoteric changes to existing schemes. A country that wants to lead in science, technology and innovation cannot keep offering policy half-measures while the US and Asia deploy billions with clear strategic intent.
The truth is that this Budget tries to revive confidence without addressing the structural issues that drove it down in the first place. Competitive capital markets cannot be built on temporary tax breaks and lightly updated savings products. It requires bold, sweeping reform across pensions, regulation, research, listings and investment incentives.
The UK has the raw talent to be the world’s leading capital markets hub, but this Budget does not do enough to get us there. Unless the government is prepared to go much further and act at the scale required, Britain will remain in a holding pattern while others steam ahead.
Tim Focas is head of capital markets at Aspectus Group