Tax breaks could lead UK pensions into domestic stocks, says exchange chief
The UK is struggling to attract companies to list on the London Stock Exchange, with fundraising from new listings falling to a 30-year low.
Part of the problem is the diminishing pool of capital in Britain, as pension funds have retreated over the past couple of decades. Some investors have clamoured to mandate UK pensions to invest in domestic stocks.
But forcing UK pensions is not the solution, according to David Schwimmer, chief executive of the London Stock Exchange Group. “We are not pushing for mandation,” he said.
Instead, he reckons tax breaks should be used to encourage domestic flows into UK public markets, writes Nikou Asgari.
“It’s very important to take a look at the fact that the pension funds get about £49bn a year in tax incentives,” he added.
Making those tax benefits conditional on pension funds putting a minimum percentage of their assets into UK investments “would seem to be very, very reasonable”, Schwimmer said.
Although LSEG makes most of its revenues from its data and analytics business, the group remains at the heart of the City and is a barometer for the health of the UK’s capital markets.
“The London market has had a number of very positive, healthy reforms over the last few years,” Schwimmer said, adding that multiple companies were lining up to float in London soon.
Business bank Shawbrook is planning to list in the UK, while insurer CFC is also weighing an IPO.
But companies are still leaving or have been snapped up. Last week Brookfield struck a £2.4bn deal to acquire life insurer Just Group while Wise shareholders voted to shift the fintech’s primary listing from London to New York.