The government’s latest Budget promises to revive UK capital markets. The City minister sounds confident, the narrative’s upbeat, and the reforms are wrapped in the language of revival. But here’s the uncomfortable truth: this package is far too cautious for an economy that’s spent a decade watching its global competitiveness crumble. This isn’t a reboot of UK capital markets, it’s barely a restart.
The UK Listing Relief Isn’t the Game-Changer It Seems
Let’s talk about the much-hyped UK listing relief. Removing Stamp Duty Reserve Tax (SDRT) for three years after listing sounds exciting on paper. But it’s a temporary sweetener, not a structural incentive.
Here’s the problem: companies don’t choose where to list based on a short-term tax holiday. They choose based on long-term credibility, regulatory strength, and investment culture. The UK still suffers from a massive valuation gap compared to the US, and SDRT relief doesn’t even touch that issue. It’s a gesture when what capital markets reform actually needs is genuine free-market ambition.
ISA Reform Won’t Magically Bring Retail Investors Back
The Budget also pushes ISA reform to encourage retail participation. It’s important, sure. But the idea that ISA flexibility alone will unleash a wave of domestic capital into UK equities? That’s optimistic at best.
Retail investors haven’t stayed away because of a lack of wrappers. They’ve stayed away because UK equities have failed to deliver compelling returns compared to global alternatives. The regulatory environment has made investing feel unnecessarily complex. Raising the ISA allowance might help at the margins, but without genuine supply-side reform to make UK equities attractive, these are small steps dressed up as transformation.
London’s Lost Ground as a Listings Destination
The Budget’s broader message is that the UK is already a strong marketplace needing only a few targeted adjustments. But that overlooks an uncomfortable reality: London has lost serious ground as a listings destination. Private markets are ballooning whilst public markets shrink. Institutional capital keeps drifting offshore in search of scale and liquidity.
The government might cite record FTSE highs and strong aggregate capital raising, but those stats obscure deeper structural erosion. The real issue? The hollowing out of growth listings, declining research coverage, and a regulatory approach that’s prized caution over competitiveness.
What the UK Actually Needs for Capital Markets Reform
Where should the Budget have gone much further? Start here:
Fundamental Pension Reform
The UK needs to reverse the retreat from domestic equities. Pension funds have systematically reduced their exposure to UK stocks, and that’s starved the market of long-term capital.
A Lighter-Touch Regulatory Framework
Britain needs regulation that consistently rewards risk-taking, innovation, and capital formation—not supervision that defaults to defensive mode. The current approach suppresses liquidity and depresses valuations.
A Genuinely Compelling Listings Regime
Not just simplified, but actually attractive. Global firms need clear incentives to anchor their growth here, not more incremental tweaks.
Coordinated Strategy Across Government
Treasury, regulators, and industry need to work together rather than rolling out a patchwork of isolated measures.
Scale-Ups Need More Than Token Gestures
Scale-ups will welcome the nods to talent incentives and British Business Bank capital. But even here, the ambition feels constrained. High-growth companies deciding whether to scale in Britain or move abroad are responding to global competition, not esoteric changes to existing schemes.
A country that wants to lead in science, technology, and innovation can’t keep offering policy half-measures whilst the US and Asia deploy billions with clear strategic intent.
The Bottom Line on UK Capital Markets Reform
This Budget tries to revive confidence without addressing the structural issues that drove it down in the first place. Competitive capital markets can’t be built on temporary tax breaks and lightly updated savings products. It requires bold, sweeping reform across pensions, regulation, research, listings, and investment incentives.
The UK has the raw talent to be the world’s leading capital markets hub. But this Budget doesn’t do enough to get us there. Unless the government acts at the scale required, Britain will remain in a holding pattern whilst others steam ahead.
Want to see real change in UK capital markets? Push for bold reform, not incremental tweaks.
FAQ: UK Capital Markets Reform
Q1: What is the UK doing to reform capital markets?
A: The government’s removing Stamp Duty Reserve Tax for three years after listing and expanding ISA flexibility. Critics argue these measures are too incremental to address deeper structural problems like the UK’s valuation gap with the US.
Q2: Why are UK capital markets struggling?
A: London’s lost ground as a listings destination due to declining valuations, pension funds retreating from UK equities, heavy-handed regulation, and fierce global competition. Private markets are growing whilst public markets shrink.
Q3: What’s wrong with the SDRT relief for listings?
A: It’s a temporary three-year measure rather than a permanent structural incentive. Companies choose listing venues based on long-term regulatory credibility and investment culture, not short-term tax holidays.
Q4: Will ISA reform bring retail investors back to UK equities?
A: Unlikely on its own. Retail investors have stayed away because UK equities haven’t delivered compelling returns compared to global alternatives. ISA flexibility helps at the margins but doesn’t address the core supply-side issues.
Q5: What reforms would actually strengthen UK capital markets?
A: Fundamental pension reform to reverse equity retreat, lighter-touch regulation rewarding innovation, a genuinely compelling listings regime with clear incentives, and coordinated strategy across treasury, regulators, and industry—not isolated measures.
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Effective Date: 15th July 2025
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