The UK's stock market is facing an existential crisis, with British companies increasingly being snapped up by overseas institutions rather than domestic investors. This trend has been starkly highlighted in recent months, with the opportunistic takeover bid for EasyJet by a foreign private equity firm serving as a prime example of what analysts predict will become an increasingly common occurrence. The numbers are staggering: since January 2023, British companies have been subject to £165 billion worth of takeover bids, dwarfing the mere £6 billion raised through Initial Public Offerings (IPOs) during the same period.
Industry experts warn that this imbalance poses a significant threat to the long-term health and competitiveness of the UK market. Charles Hall, head of research at Peel Hunt, has sounded the alarm on the UK's declining attractiveness as a listing destination, while Richard Stone, chief executive of the Association of Investment Companies (AIC), has called for "bolder interventions" to safeguard the London market.
A key factor behind this decline is the lack of a robust investing culture among UK households. Despite government efforts to encourage domestic investment, such as the retail investment campaign fronted by 'Savvy the Squirrel', only 23% of British investors have taken action due to political instability, according to research from investment platform IG. This has led industry leaders to urge the incoming government to implement significant tax reforms designed to incentivise domestic investment in UK equities.
Proposals include abolishing stamp duty on share purchases and reversing the decision to reduce tax relief on Venture Capital Trusts (VCTs) from 30% to 20%. Richard Stone argues that these measures would provide a substantial financial return to the UK economy by encouraging more investors and driving economic growth. However, it remains to be seen whether such reforms will be enough to revitalise the UK stock market and restore its competitiveness in the face of increasing foreign interest.