Copyright standard
In a year of tariff turmoil, buying British has been back in vogue. That’s easy to do browsing for fruit and veg in the supermarket, where 42,000 British farmers are certified by the Red Tractor standard. But it’s much harder when picking out anything with a complex, international supply chain behind it. It is gratifying, however, that this government is eager for British consumers to put more British shares in their shopping basket. This is about creating a virtuous circle of better valuations for UK companies, domestic economic growth, financial understanding and higher standards of living. And, with the lowest level of retail investment in the G7, it’s about time too. As the City Minister, Lucy Rigby, wrote this weekend, “by keeping large sums in cash rather than investing, very large numbers of Brits are missing out on the opportunity to be far, far better off”. Investing more domestically throws a spotlight on the ISA regime, where debate has focused on cutting the cash ISA limit from £20,000 per year. More importantly, I hope the Budget on November 26 involves “steering a portion of this domestic, tax-protected investment towards UK public companies”, as the Quoted Companies Alliance set out in its Budget submission. Those resisting change point out how confusing ISAs supposedly are, but, as I said before the Business and Trade Select Committee the other day, a UK relief for UK investors in UK companies would be simple to understand. It would also hark back to the ISA’s antecedent, the “personal equity plan” launched at the 1986 Budget by the Chancellor, Nigel Lawson, whose theme of “popular capitalism” was greeted with scepticism too. Fast forward almost four decades, and, when money is tight, getting bang for the state’s buck – in this case the £5.6bn value of the tax relief on Stocks and Shares ISAs – is imperative. The arguments against skewing an ISA more closely to UK investment simply do not add up. On the one hand, critics say retail investors should not be hamstrung by being limited to just one market in case it underperforms others. Yet they also say that British stocks are nothing of the sort, with many of the largest deriving a great portion of their income from overseas. It sounds like an ideal accommodation. And investors can still invest in Google and Nvidia, but the state would not reward them to export quite so much capital. If investors do want to align their wealth with the UK economy, and with companies embedded in their local communities, they should look beyond the FTSE 100. The long tail of small and midcaps that make the London markets so special contains automotive experts in Wiltshire, aerospace entrepreneurs in Lancashire, brilliant biotech in Newcastle and battery storage in South Wales. Give them more growth capital and they will innovate, invest, hire and export. I’m not offering financial advice but shares tend to outperform property, cash or government debt in the long term. Along the way, there are bound to be ups and downs. Nevertheless, backing ourselves should not be an alien concept. Getting this right is about international competitiveness. France insists that its investment scheme for retail investors, PEA, must focus on Europe-listed shares or funds. It even has a version for small and midcap companies, PEA-PME, which has raised more than £600m. In Sweden, where close to 40% of the nation’s wealth is invested in stocks – five times the UK proportion – the tax-free element of its extremely popular ISK savings product will be doubled next year. I believe the Government gets this. It has corralled together the Sterling 20, a partnership of pensions providers and insurers, to back infrastructure projects and fast growing businesses. That follows on from the Mansion House Accord, which puts another focus on the UK. However, the grumble from some of these signatories that the Government must help build out investment opportunities for them appears to overlook the circa 700 eligible companies that trade their shares on AIM and Aquis every day. And there is further to go. It is time that UK DC pension schemes upgrade their UK equities exposure in order to retain their tax-advantaged status. A cultural shift is also essential, hand in hand with the moves that Government can make. That won’t be quick. One marketing campaign, “Own your share of American business”, ran for 15 years from 1954 to win over doubtful US investors in the decades after the Wall Street Crash and the Great Depression. By the mid-1960s, share owners as a percentage of the population had more than doubled to over 10%. I hope that the UK’s new retail investment campaign, due to be unveiled early in the New Year, will prove to be similarly seismic. After years in which consumers have been herded towards the dullest savings options, it would be a shame if this campaign plays it unnecessarily safe. It is time to say buy shares and buy British – and be proud to do so. James Ashton is Chief Executive of the Quoted Companies Alliance.
