In the Spring Budget the Chancellor announced further stimulus for equity investment and capital market reforms. Samantha Harrison shares her insight on Jeremy Hunt's plans.

The Chancellor continues to build on the Mansion House speech and Edinburgh Reforms with more policies intended to incrementally increase the flow of equity capital into UK growth-companies. These measures are intended to further the Government’s ambition to make the UK a more attractive venue to grow and list companies.

There's still more work to be done and many will remain unsatisfied that stamp-duty on shares trades wasn't removed.

The focus on pension funds continue

The Spring Budget continues the theme that the Government is focused on improving pension and savings returns through promoting increased equity investing.

From April, the local Government pension schemes will have to provide their asset allocation, including to UK equities, and provide progress on pooling funds to create larger funds, capable of generating better returns and broader allocation. A similar trajectory on reporting is being pursued already by the FCA for defined contribution schemes.

Hunt set out the Mansion House Compact in July 2023, where two thirds of the UK’s defined contribution funds agreed to allocate at least 5% of their default funds to unlisted equities by 2030. Importantly, ‘unlisted equities’ includes AIM and AQUIS Growth Market-quoted companies. In July, and re-iterated since, Hunt said that this could unlock up to £50 billion to be invested in UK growth companies. The Chancellor now has announced that a framework to monitor progress is being finalised. We can expect further updates on this as the Mansion House Compact has its first anniversary.

Update on the Long-term Investment for Technology and Science initiative (LIFTS)

These investment vehicles, tailored to pension schemes, were announced in the 2023 Autumn Statement. The aim is to facilitate investment into the UK’s most innovative companies through £250 million fund. We have two successful bidders announced, Schroders and Intermediate Capital Group (IGC), who will be supported by pensions capital from Phoenix Group. This is subject to ongoing commercial discussions, so we can’t expect the funds to start being deployed just yet.

The British ISA

Following further calls from industry after the British ISA wasn't included in the Autumn Statement, the Chancellor has now announced that it will be launched. The headline £5,000 additional allowance (on top of the current £20,000 allowance) for UK equities has been confirmed. However, details are subject to consultation, so timing and the exact definition for ‘UK-focused assets’ which will be eligible remain to the confirmed.

A new British Savings Bond

Also announced was the launch of a British Savings Bond. To be managed by National Savings & Investments (NS&I), this will offer a guaranteed interest rate, fixed for three years. This product will increase savings opportunities available to consumers in the UK and will be brought on sale in early April 2024.

Stock Market reforms

The Budget made no reference to the ongoing review of the UK’s stock exchange regulations for companies. These were part of the Edinburgh reforms and there has been progress on this front since the Autumn Statement.

The FCA published proposed changes to the Listing Rules in December and the consultation will close shortly. The rules can be expected to be amended in the second half of the year and the companies will be able to take advantage of a reduced regulatory burden when considering M&A and other activity. Included in these changes are also amendments to eligibility for listing which make the regime more flexible and open to a wider range of companies. This is anticipated to make listing in the UK more appealing to business owners.

Following this, we can expect updates later this year on the streamlining of the rules around prospectuses (affecting public offers). These changes are expected to make it easier for secondary fundraises to occur and also for retail offers to be included by AIM issuers at IPO and in follow-on fundraises.

For more insight and guidance, get in touch with Samantha Harrison.