6th Mar 2024 16:01
(Alliance News) - Plans for a "British Isa" were among the marquee policies announced by the UK Chancellor Jeremy Hunt, in a move which could breathe some life into the UK stock market.
But there was a warning from the AJ Bell PLC boss that the measures could "confuse people to the point of inaction".
In an aim to get the UK investing again, Hunt announced plans for a British Isa, giving investors a GBP5,000 extra tax-free allowance, on top of the existing GBP20,000 limit, to "encourage more people to invest in UK assets".
"This will be on top of the existing ISA allowances and ensure that British savers can benefit from the growth of the most promising UK businesses as well as supporting them with the capital to help them expand," Hunt said.
Richard Stone, the chief executive of the Association of Investment Companies, said: "We welcome the introduction of a UK ISA to encourage investment in the UK stock market. We've been calling for this as part of a broader initiative to reinvigorate the UK's capital markets as well as promoting wider share ownership.
"All UK-listed shares, including investment companies, should be eligible for the UK ISA. We have more than 350 UK-listed investment companies, including more than a third of the FTSE 250. These companies provide access to diversified portfolios of equities, as well as hard-to-access assets like private companies, infrastructure and property."
Stone said an investment company would be "an excellent starting point" for those taking advantage of the Isa.
"They have strong long-term performance, with the average investment company returning 158% over the last ten years. In addition, investment companies have boards of directors to look after shareholders' interests and investors can attend AGMs, ask questions and vote, providing the ability to actively engage with their investments," Stone said.
Saxo analyst Dan Squires picked up out a number of names would-be investors should look at, including some of the UK's most iconic brands.
Bootmaker Dr Martens PLC and carmaker Aston Martin Lagonda Holdings PLC are some of the names the analyst picked out.
Squires noted they are "iconic British brands that have struggled recently, but look interesting now".
Vodafone Group PLC is another that may be looked at, though Squires noted the stock has "fallen out of favour" recently.
Elsewhere, Alphawave IP Group PLC, described as a "mini Nvidia" and Yellow Cake PLC a uranium investor, were tipped.
Edison analyst Neil Shah labelled the British Isa "a step in the right direction".
"By reforming the Isa system to support UK businesses, Hunt aims to keep capital at home and fuel the growth of promising ventures, reinforcing London's pivotal role as a premier destination for companies seeking access to capital markets. However, more needs to be done to ensure we plug the leak of homegrown businesses choosing to list on international exchanges," Shah added.
AJ Bell Chief Executive Michael Summersgill was less optimistic, however.
Summersgill said: "Increasing investment into UK companies is a laudable aim, but this ill-conceived, politically motivated decision will simply not achieve that objective.
"A tiny minority of people max out their GBP20,000 ISA allowance each year, but these are the only ones that will see any benefit from the additional British ISA allowance. In the context of the GBP2 trillion+ UK stock market, any additional investment generated by these investors through the British ISA will be a rounding error."
The measures may also cause confusion, he warned.
"Investors will have to choose from six ISA types when they open an account and will need to consider what they want to invest in when deciding which variant to choose. This additional complexity could paralyse investors into doing nothing," the AJ Bell CEO said.
By Eric Cunha, Alliance News news editor
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Alphawave IpDr. MartensAJ BellAston Martin Lagonda