Interactive Investor

Fund firm calls for new ISA to just invest in UK shares

A ‘Great British ISA’ could help improve stock market valuations and encourage entrepreneurship, according to a UK fund group.

6th September 2023 11:21

by Sam Benstead from interactive investor

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UK flag with stockmarket backdrop.

A UK fund group with £11 billion in assets under management has called for a new £5,000 ISA allowance to invest in listed UK companies.

Premier Miton Investors is lobbying for a “Great British ISA” that would directly invest money into listed UK companies, therefore encouraging firms to list their shares on the stock market and for private companies to stay and grow in the UK.

It proposes that the new £5,000 ISA allowance would sit alongside other existing ISAs, giving investors up to £25,000 a year that is free from capital gains and income tax.

The fund group says that the new ISA could unleash £42 billion in investment for UK companies in the first year of the ISA. If this was repeated over five years, UK plc could benefit to the tune of £210 billion, it says.

It calculates this by taking figures from the Financial Conduct Authority (FCA), which show that 8.4 million people who have £10,000 or more of investable assets hold most or all of it in cash. If everyone in this group invested £5,000, then that leads to more than £42 billion put to work in the stock exchange.

Premier Miton therefore experts such a wave of investment to “drastically” drive down the cost of capital and deepen liquidity, which in turn could support improved company valuations, which is a key consideration for why many home-grown companies choose to list abroad.

It will also help to defend the UK’s best companies from being taken over by overseas buyers who tend to hunt in the UK for bargains, it argues.  

Mike O’Shea, chief executive of the group, adds: “Ensuring companies have access to the capital they need will encourage them to scale up and list here in the UK. This will mean that companies’ headquarters, and all the associated high-paying roles, tax receipts and international prestige, remain here in the UK.

“At Premier Miton Investors, we think more British savings should be going into British companies. Our proposal, for a Great British ISA, would sit alongside other existing ISAs, and help retail savers invest directly in listed UK equities.

“The GB ISA would fully unlock the potential of the City, to not only scale up smaller private companies, but to provide those same companies with an attractive listing environment to stay and grow here in the UK. With cross-party political will, we can deepen the capital liquidity on offer to British businesses and make the UK listing regime the global capital of capital.”

UK shares are laggards globally in terms of performance, and low valuations are leading to takeover bids from international investors and UK companies choosing to list their shares in America in pursuit of higher valuations.

Over the past 20 years, the FTSE All-Share index has delivered a total return of 289% compared with 495% for the MSCI World Index and 632% for the S&P 500 index of large US shares.

Interactive investor has spoken out against there being too many ISAs, which it says confuses investors and discourages them from investing.

Writing to the government, it said: “The more investment wrappers placed in front of potential savers, the fewer of them will actually benefit from saving and investing for their future.

“For example, a 30-year-old self-employed basic rate taxpayer who wishes to save for the future and may not yet know exactly what those future savings will be used for, must decide between five different ISA wrappers, from straightforward equity and cash ISAs, through to Help to Buy, Lifetime and Innovative Finance ISAs, before they even decide the specific investment they want to put in their savings arrangement.”

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