UK warned of risk of becoming incubator nation for global start-ups

The United Kingdom faces the risk of becoming an incubator nation, a status in which it nurtures promising start-ups only to lose them to rival markets before they reach their full potential. This warning was delivered to Chancellor John Healey by the Capital Markets Industry Taskforce, which urged immediate action to revitalise the London stock exchange. The group, led by LSE chief executive Dame Julia Hoggett, submitted its concerns to the Treasury ahead of the Budget, characterising the current exodus of British firms as a departure from normal business practices rather than a routine occurrence.

The taskforce’s pre-Budget submission describes the scarcity of new listings in London as a strategic growth problem that threatens the broader UK economy, not merely the stock exchange. The document asserts that the country is at serious risk of permanently exporting its most significant companies at the precise moment they become globally consequential. To counter this trend, the group has presented a series of demands aimed at encouraging a surge in new listings and preventing the loss of innovative firms to jurisdictions such as the United States. While acknowledging that the Chancellor is unlikely to abolish stamp duty entirely due to its significant annual revenue contribution, the taskforce suggested the levy could be removed for pension funds and individual savings accounts.

Further proposals include an inheritance tax relief on pensions invested in the UK over a 15-year period, a measure designed to avoid forcing pension funds into domestic equity investments. The taskforce estimates that introducing a 10 per cent tax credit on dividends required by pension funds could mobilise up to £125bn in equity by 2042, at an estimated annual cost to the Treasury of £742m. Mark Austin, a capital markets lawyer and member of the taskforce, stated that these ideas would mobilise long-term domestic capital into UK companies while respecting fiscal constraints and maintaining voluntary design choices.

The group pointed to the £24bn sale of Cambridge-based Arm Holdings to Japanese conglomerate SoftBank as evidence of the shrinking IPO pipeline in London. This year has seen a suite of London-listed firms exit the UK’s public markets, with the value of bids for listed companies totalling at least £70bn. Among those accepting takeovers are insurance firm Beazley, asset manager Schroders, and property giant Segro. Andrea Rossi, chief executive of FTSE 100 finance firm M&G, described the decline of London’s stock market as a problem for Britain. Additionally, hopes for a £7bn float for high street giant Boots were recently thwarted by its sale to the Weston family, highlighting the continued lack of major initial public offerings in the capital.