LSE mass exodus is timely reminder of importance of stamp duty

Below, Richard Wilson, chief executive officer of leading investment platform interactive investor, reflects on a disheartening year for the London Stock Exchange and why – if we are talking about reinvigorating UK markets – we need to be talking about stamp duty. 

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“The London Stock Exchange has reported data that an eye-popping 88 companies have either delisted or transferred their primary listing from the London Stock Exchange over the course of 2024 – marking the largest outflow from the London market since 2009, which was in the midst of the global financial crisis. This amounts to more than £100 billion of market value leaving UK soil. In addition, the number of new listings is also on track to be the lowest in 15 years.

This raises a critical question: where does this leave the UK stock market? And UK plc?

The previous government congratulated itself on making supportive speeches and launching various reviews – the discernible impact of which, aside from shuffling paperwork, has been zero. At interactive investor, we believe that the elephant in the room is stamp duty on UK shares. we have long campaigned for the removal of stamp duty on UK shares. We are taxing the UK stock exchange out of existence.

We tax every purchase on the main London market at 0.5% (a tax otherwise known as the stamp duty reserve tax: SDRT). This is a staggering 2.5 times higher than the equivalent levied in EU countries, and our main competitor, New York, charges nothing. As we have said time and again, markets live or die on flow, and the stock market today has become untradable. This impacts depth and valuations and leads to those who can list elsewhere, mostly growth businesses, doing so. What is left is mostly legacy industries who will eventually expire or move. If UK plc wants to support entrepreneurs and retain its great talent base it must support its financial markets. If the market dies, then growth and with it ultimately our standard of living are sacrificed.  

The damage doesn’t stop at companies. End-investors also suffer, as stamp duty is a huge barrier to investing. Recent research* we conducted found that nearly four in ten (37%) investors had decided against investing in UK shares in the past because of stamp duty. Additionally, the majority (57%) claimed that the tax would make them think twice about investing in UK shares in the future. How can we encourage investors to ‘buy British’ when they are penalised for doing so?

So far, these arguments have failed to convince the politicians to care. Most of them have no clue what financial markets do or why they matter. They think it’s just self-serving rich people playing with their money, it's easy to count the tax and doesn’t win any votes. These are ‘cloth ears’ to fit the size of the proverbial elephant.  

We urge the government to recognise the scale of this problem and act decisively. This isn’t just for the health of our markets, but for the health of the UK economy. It is a lose-lose tax. We simply can’t afford not to fix this issue.

It may not be too late. By removing stamp duty, we can restore the UK’s position as a global financial leader, attract businesses back to our markets, and create opportunities for both companies and investors. But time is nearly up.”

*According to poll of 891 investors who visited the interactive investor website on 17 April 2024.