UK Investment Banker Proposes Tax Shift to Boost Stock Market

Lisa Gordon, a prominent UK investment banker and chair of Cavendish, has proposed a significant shift in tax policy to encourage more investment in the stock market. Gordon suggests that by taxing cryptocurrency purchases and reducing taxes on stock investments, the UK could see a boost in economic activity and a revitalization of its stock market.

Gordon's proposal comes at a time when cryptocurrency ownership is high among younger Britons, with over half of those under 45 owning crypto but no equities. This trend, she argues, is concerning as it indicates a shift away from traditional investments that support the economy. According to Gordon, equities provide growth capital to companies, which in turn employ people, innovate, and pay corporation tax, thereby contributing to the economy. In contrast, she describes cryptocurrency as a "non-productive asset" that does not feed back into the economy.

Currently, the UK taxes shares listed on the London Stock Exchange at 0.5%, generating around 3 billion British pounds in yearly revenue. Gordon believes that reducing this tax could incentivize more Britons to invest in local companies, potentially leading to more companies listing on UK exchanges and creating a positive cycle for the economy.

Gordon's concerns are backed by data showing that while crypto ownership is growing, traditional investment patterns are shifting. A 2022 survey by the Financial Conduct Authority (FCA) found that while 70% of UK adults had savings accounts, only 38% owned shares either directly or through investment accounts. This trend is particularly pronounced among younger adults, with nearly three in four 18-24 year olds holding no investments at all.

Recent economic challenges, including the cost of living crisis, have exacerbated this situation. In the 12 months leading to January 2024, 44% of all adults either stopped or reduced their saving or investing activities. Nearly a quarter of UK adults reported using their savings or selling investments just to cover day-to-day expenses, further reducing market participation.

Gordon's proposal is part of a broader effort to revive the UK's financial markets. She serves on the Capital Markets Industry Taskforce, a group of industry executives working to strengthen the UK’s financial markets. Her bank, Cavendish, would benefit from a stronger market as it advises companies on public offerings.

The London stock market has faced significant challenges recently. In 2023, the exchange saw just 18 new company listings, down from 23 in 2022, and 88 companies either delisted or transferred from the London exchange. Many cited declining liquidity and lower valuations compared to other markets as reasons for leaving. Despite these challenges, Gordon claims the UK remains a "safe haven" compared to markets like the US, which have faced significant volatility due to economic uncertainties.

Gordon's proposal to tax cryptocurrency purchases while reducing taxes on stock investments aims to redirect investment towards assets that support the economy. By encouraging more Britons to invest in equities, Gordon hopes to create a positive cycle that benefits both individual investors and the broader economy. This shift could also help revitalize the UK's stock market, which has struggled with declining listings and delistings in recent years.