John Healey has been warned that Britain risks becoming an “incubator nation” that creates companies and then loses them to other countries, in a document that asks the chancellor for tax incentives estimated to cost up to £1.28bn a year to revive the London stock market.
The warning comes from the Capital Markets Industry Taskforce (CMIT), which is chaired by Dame Julia Hoggett, chief executive of the London Stock Exchange, according to The Sunday Times. The document has been submitted to Healey as he prepares the Budget on 28 October. CMIT is a cross-body lobby group that was endorsed by the previous government.
The document says the current wave of takeovers of London-listed companies is “not business as usual”, the newspaper reported, and raises concerns that those companies are not being replaced through initial public offerings. It describes the shortage of new listings as a “strategic growth problem” rather than an issue for the exchange alone.
“The UK is at a serious risk of becoming forever an incubator nation, exporting its greatest companies just at the point they become globally consequential,” the document is understood to say.
It cites Arm Holdings, the Cambridge-based chip designer, as an example to avoid. Arm was listed in London until it was bought by the Japanese conglomerate SoftBank, and it floated in New York in 2023. CMIT said the “shrinking” of the London market was itself a deterrent to companies choosing to list in Britain.
Three proposals
The document sets out three broad ideas that are intended to be low cost and to avoid concerns that pension schemes would be forced to invest in UK shares.
The first concerns stamp duty, which is levied at 0.5 per cent on share deals. The document acknowledges that the tax brings in £3bn a year and that full abolition may not be palatable for the chancellor, and suggests abolishing it for pension funds and individual savings accounts (ISAs). HMRC statistics show stamp duty reserve tax receipts of £3.05bn in the 2024 to 2025 financial year. The CBI and more than 30 FTSE leaders urged ministers to scrap or reform the duty in July 2025.
The second would create inheritance tax relief on pensions invested in the UK over a 15-year period.
The third is a 10 per cent tax credit on dividends for pension funds, a modified form of the dividend tax credit abolished by Gordon Brown in 1997. The document is understood to show this would mobilise as much as £125bn of equity by 2042, at an annual cost to the Treasury of up to £742m.
Together, the three measures are estimated to mobilise £161bn of capital by 2042 and to cost up to £1.28bn annually over the next 15 years.
Mark Austin, a partner at the law firm Latham and Watkins and a member of CMIT, confirmed the document existed and said the ideas were intended to “be helpful and mobilise long-term domestic capital into UK companies, while respecting a fiscally constrained environment and keeping cost capped, design choices voluntary and fiduciary duties intact”.
Takeover bids of at least £70bn
The total value of bids for listed companies so far this year is at least £70bn, The Sunday Times reported. The FTSE companies Beazley and Schroders have both left the stock market after takeovers.
Ian Hewett, investment director at Aberdeen, said: “Companies leave the stock market so regularly now that bids that once would have prompted vigorous debate can pass with relatively little discussion.”
Writing in The Sunday Times, Andrea Rossi, chief executive of the FTSE 100 financial firm M&G, described the “decline of London’s stock market” as “a problem for Britain”. He proposed requiring companies that receive taxpayer support through grants or subsidies to be listed in London.
“If we want growth in every postcode, thriving UK public markets should be at the heart of that ambition,” he said.
The Treasury declined to comment on Budget speculation but said: “As we set out in the budget in 2025, we continue to evaluate stamp taxes on shares to ensure the UK is positioned well for the future. Keeping taxes under review is normal practice.” The 2025 Budget introduced a three-year stamp duty relief for newly listed companies.
