The leaders of City stockbroker Cavendish have urged for more decisive government action to rejuvenate Britain’s struggling stock market, proposing tax incentives for entrepreneurs as a key measure.
John Farrugia and Julian Morse, co-chief executives of Cavendish, highlighted concerns over the London Stock Exchange’s vitality, noting that many of Britain’s top businesses were bypassing the public market in favor of private equity partnerships.
They emphasized the necessity for deeper reforms than those presently under consideration to enhance London’s attractiveness for entrepreneurs.
Farrugia and Morse recommended initiatives such as eliminating capital gains tax for entrepreneurs selling shares during an initial public offering (IPO) to incentivize listing on the stock market over private equity deals.
Additionally, they suggested reducing corporation tax for pension funds that allocate a minimum portion of their assets to UK companies.
Farrugia, 47, emphasized the potential benefits of exempting entrepreneurs from capital gains tax, stating, “At the moment, the best companies are staying private.”
Under the current tax regime, small business owners face capital gains tax rates of approximately 10% on the first £1 million earned from business sales and 20% on amounts exceeding this threshold, regardless of whether the exit is through a private sale or an IPO.
Morse, 52, underscored the importance of incentivizing British pension funds to invest more in UK stocks, given the decline in their equity holdings over the past two decades.
Only 23 companies went public in London last year, raising £1 billion, lagging behind other international exchanges.
The current year has also seen a sluggish start, with only a couple of new listings, including Kazakh airline group Air Astana and MicroSalt.
Despite Chancellor Jeremy Hunt’s reform efforts, which include proposals for a British Isa to promote retail investment in UK stocks and changes to listing rules to reduce red tape, Farrugia believes more substantial reforms are necessary.
Cavendish, renowned for its brokerage services to small firms, maintains a unique insight into the UK’s economic terrain, with 140 clients on the junior stock market and an additional 60 on the main market.
Farrugia noted a more optimistic outlook compared to the previous year, with falling inflation rates and expectations of interest rate cuts.
He observed a renewed interest among companies in exploring growth opportunities that were previously on hold.
