Barclays has endorsed a review of the stamp duty on share purchases, advocating for reforms to help revive the UK’s struggling stock market.
In a report released on Monday, the bank emphasised the need for various changes to enhance London’s appeal on the global stage and to encourage unlisted companies to list on the UK’s main market.
The City of London has been actively calling for the abolition of the stamp duty reserve tax in recent months, following its removal for junior market transactions in 2014.
The current 0.5 per cent tax generates approximately £3.8bn annually for the Treasury. However, a recent report by consultancy firm Oxera suggested that scrapping the levy could boost investment in the FTSE by up to £6.8bn per year.
Barclays noted, “Examining the impact of removing stamp duty on liquidity and investor demand for junior market stocks could offer valuable insights into the potential benefits of eliminating the tax on main market transactions.”
Barclays’ Group Head of Strategic Policy Katharine Braddick added, “While significant progress has been made in enhancing policy frameworks in recent years, our research indicates there is still more to be done.”
The bank’s call for reform aligns with broader efforts to strengthen the UK’s capital markets and increase competitiveness globally.
“Removing unnecessary frictions for high growth companies looking to graduate into main markets would drive dynamism and agility within UK capital markets,” she said.
Overall, Barclay made five suggestions that could boost the London Stock Exchange, focusing especially on changes that could smooth the transition for companies moving to it from junior markets, like Aquis and AIM.
These included removing the requirement for a prospectus for admission to a UK-regulated market for companies if it has been listed on a junior market for at least 18 months, as well as removing the ‘cliff edges’ that exist for companies moving between them and the main market.
This could involve sustaining the tax incentives currently provided for unquoted and unlisted companies, such as through Enterprise Investment Schemes and Venture Capital Trusts, when they graduate from a junior market to a senior market, for a limited period of time.
“The alleviations from inheritance tax and capital gains tax are seen as particularly powerful in relation to founder-led companies,” Barclays said.
With these cliff edges in place, unlisted companies are hesitant to graduate to a main market, as they risk losing what might be a significant part of their investor base.
Director of Policy and Strategy for Capital Markets at Barclays Rhiannon Price added: “Our research shows that while both junior and main markets are effective at helping companies with capital raising and providing liquidity and volatility, certain areas of the junior markets are not meeting the needs of companies.
“A problem which we believe could be resolved with a smoother pathway for companies to graduate to main markets,” Price said.
Barclays calls on the UK to break down barriers keeping £430bn from capital markets.