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Labour government abandons British ISA

Journalist: John Choong (Head of Markets and Research), Newspage

ended 05. September 2024

In another shot in the foot for the UK stock market, Financial Times are reporting that the Labour government has abandoned the proposal for a British Stocks & Shares ISA, which was previously touted under the Conservative government earlier this year. The Tory government had proposed that to extend the current allowance of £20,000 a year to £25,000, with an extra £5,000 allowance for UK-listed equities only.

This was done to encourage further investment into the London Stock Exchange which has been seeing an increasing amount of outflows from equity funds, stocks getting delisted, and acquisitions from private equity. The latest data from Calastone showed that investors continue to pour out of UK equity funds for a 39th consecutive month.

However, AJ Bell CEO Michael Summersgill welcomed the decision to drop the plans. According to the FT, Summersgill stated, “The UK ISA was a political gimmick that was doomed to fail in its objective of boosting investment in UK PLC."

Newspage asked analysts, economists, and experts for their views on whether this was the right decision, whether they agree with brokerage platforms, other ways the government could encourage more UK investment. 

4 responses from the Newspage community

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Editor
Gabriel McKeown
Head of Macroeconomics at Sad Rabbit - Substack Newsletter
Once a bustling hub of activity, the LSE now stands as a shadow of its former self, a ghost town where investors once thrived but now tread cautiously. Yet, Labour's decision to abandon the British ISA is leaving the UK market to haemorrhage further, causing even the most hopeful investors to lose faith in its recovery. The BRISA was designed as a lifeline for the market, struggling with persistent outflows from equity funds, delistings, and acquisitions by private equity firms.

Of course, the effectiveness of the BRISA was always in question, and given the current financial climate, this decision might be seen as pragmatic. However, for many, the BRISA was designed to act as a catalyst, encouraging investors to reallocate their capital towards the UK. However, with the policy abandoned, the UK is left like a lighthouse without its light, struggling to attract investors amidst the fog of global competition.
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Platinum
John Choong
Head of Equities and Markets at Interpretiv
The British ISA was never going to be the magic wand for the UK stock market as the number of investors maxing out their £20k allowance pales in comparison to the amount big corporations are investing. However, in a market gasping for liquidity, even small sips count.

Yet, the government seems determined to turn the UK market into a financial desert. Higher taxes, CGT-income tax alignment, vague business rate reforms, windfall taxes on FTSE giants, and the latest move to abandon the British ISA is anything but pro-growth.

AJ Bell's CEO might be popping champagne because they’re reliant on clients trading foreign stocks instead due to FX fees being their cash cow. However, local investors and PLCs will be left with a bitter taste. If Westminster truly wanted pro-growth policies, they'd axe the 0.5% stamp duty on UK stocks – one of the world's highest.
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Premium
Philip Dragoumis
Director and Owner at Thera Wealth Management
This is great news. The British ISA was an unworkable and silly idea which would have just created headaches from everybody and would have attracted no extra investment. The government should try and help create an economy and an environment that is stable, business and investment friendly and then the investment will flow.
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Riz Malik
Independent Financial Adviser at R3 Wealth
With Halloween on the 31st, it seems the real scare might come a day early this year. The Chancellor appears to have dismissed the idea of an additional tax-free allowance for British ISAs, especially with the looming budget warnings of financial strain. The question now is whether there will be any other support for UK stocks, which have been trailing behind their international peers over the past few years.