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Smaller UK firms need help to end ‘doom loop’, think tank says
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LONDON (Reuters) – Britain’s smaller listed companies can reverse a “doom loop”, driven by plummeting valuations and higher costs and regulation, with help from broader
LONDON (Reuters) – Britain’s smaller listed companies can reverse a “doom loop”, driven by plummeting valuations and higher costs and regulation, with help from broader tax exemptions and incentives, a think tank said on Thursday.
Smaller companies represent only 8% of the combined value of Britain’s bourse. But they account for over 80% of listed UK companies, provide key jobs and investment and can become tomorrow’s stockmarket darlings with help from the government, regulators and industry, New Financial said.
Two weeks before Finance Minister Rachel Reeves presents her first budget on Oct. 30, the think tank suggested extending exemptions from stamp duty, a tax on share trading, to include the smallest 250 listed firms along with differential rates on capital gains or dividends on British companies.
“Making recommendations on tax and incentives a few weeks before a budget … is perhaps a foolish exercise.
But there is an opportunity for a new government focused on growth to adjust incentives for investment in smaller companies,” it said in an analysis on the decline in smaller listed companies.
Reeves, whose party came to power in July on a promise to get Britain’s economy growing, has ruled out raising the rates of income tax, national insurance and value added tax, but has also said she has to fill a 22 billion pound ($29 billion) hole in the public finances.
Smaller listed companies have borne the brunt of a collapse in demand by institutional and retail investors. The number of smaller company market debuts plunged by 80% to just 22 over the past decade, while the value raised by new issues has dropped by 90%, New Financial said.
UK smaller company funds, meanwhile, have recorded a 36th consecutive month of outflows, while the number of local authority pension schemes with a dedicated allocation to the sector has fallen from 18 to just one over the past decade.
But Australia, Canada and Sweden, where smaller companies have been thriving, are offering hope. A concerted effort by government, regulators and the industry can set smaller companies back on track,” the think tank said.
($1 = 0.7683 pounds)
(Reporting by Kirstin Ridley; Editing by Alexandra Hudson)
A tax exemption is a monetary exemption that reduces taxable income. It allows individuals or businesses to avoid paying taxes on certain income or transactions.
Capital gains are the profits earned from the sale of an asset, such as stocks or real estate, when the selling price exceeds the purchase price.
Stamp duty is a tax imposed on legal documents, usually related to the transfer of property or shares. It is calculated based on the transaction value.
A budget is a financial plan that outlines expected income and expenditures over a specific period, helping individuals or organizations manage their finances effectively.
A market debut refers to the first time a company offers its shares to the public, typically through an initial public offering (IPO).
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