- IG Group said cash ISAs are ‘hindering rather than helping’ Britons grow wealth
The UK Government should abolish the cash ISA to help bring a halt to the ‘crisis’ facing the UK stock market, a major trading platform has urged.
IG Group said cash ISAs are ‘hindering rather than helping’ millions of Britons to accumulate wealth as it launched a ‘Save Our Stock Market’ campaign.
It wants to stop new cash ISA accounts from being opened and for the maximum £20,000 allowance to fall to zero from next April.
IG wants the billions in tax relief generated by cash ISAs to be redirected towards ‘more productive equity investments’.
According to the firm’s analysis, cash savers have seen roughly one-seventh of the real returns of UK investors since cash ISAs were first introduced by then Chancellor Gordon Brown in 1999.
Yet the popularity of cash ISA subscriptions is growing, while the use of stocks and shares ISAs is in decline.
Warning: ‘The UK is stuck in a damaging savings-first mindset, with far too few people investing to build wealth for the long term,’ says trading platform IG
Figures released by HMRC last year showed the number of cash ISA subscriptions increased by 722,000 in 2022/2023, while stocks and shares ISAs fell by 63,000.
IG believes the UK suffers from an ‘overly cautious regulatory approach’ to investing that is holding back the country’s stock market.
‘We’re watching a crisis unfold, and we need bold action,’ warned Michael Healy, UK managing director at IG. ‘Our stock market – once the envy of the world – is in a downward spiral.
‘At the same time, the UK is stuck in a damaging savings-first mindset, with far too few people investing to build wealth for the long term.’
A total of 88 companies either delisted or transferred their primary listing from the London Stock Exchange last year – the most since 2009, according to EY.
Many of them were acquired by private equity firms, including cybersecurity giant Darktrace, music rights investor Hipgnosis Songs Fund, and video game services provider Keywords Studios.
Others opted to change their main listing to another bourse, such as tourism business Tui, takeaway platform Just Eat, and Paddy Power owner Flutter Entertainment.
Fintech platform Wise, drugmaker Indivior, and rental equipment supplier Ashtead Group have also announced their intentions to have their main listing on Wall Street.
Companies switching their primary listing or going public in the US can potentially access larger investment pools and secure higher valuations.
Just 18 firms were listed on the LSE in 2024 despite the UK Government relaxing regulations on listings in recent years to try and attract more high-growth technology companies.
The year before that, Softbank decided to list Cambridge-based semiconductor firm ARM Holdings, whose semiconductor chips power almost every smartphone, in New York instead of London.
Analysts have blamed the relative unattractiveness of London’s stock market on Brexit, a weaker pound, and the lack of investment by UK pension funds in domestic stocks.
IG suggests that UK shares held in ISAs for at least three years enjoy 20 per cent tax relief to help bolster retail investment in British companies.
It also wants to scrap stamp duty on UK shares, which it calls a ‘self-inflicted wound’ that ‘unfairly penalises’ UK investors.
As part of its campaign, the business is offering £100 worth of UK shares to all customers who join between now and 15 August.
Healy added: ‘For too long, policymakers have been paralysed by the desire to keep everyone happy. But the time for working groups is over – this is about getting more Brits investing, while saving a strategic national asset before it’s too late.’
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