City bosses are in favour of extending Mansion House rules to require pension funds to invest a portion of funds into small and mid-cap listed stocks, according to a poll by stockbroker Peel Hunt Ltd (AIM:PEEL).
A proposal made by Chancellor Jeremy Hunt during his Mansion House speech in July, worth up to an estimated £50 billion by 2030, involved nine of the UK’s major pension funds investing 5% of cash from pension funds into unlisted companies.
Hunt and the Lord Mayor of London, Nicholas Lyons, arranged for ‘defined contribution’ pension providers, with £400 billion of combined assets, to allocate 5% of assets to unlisted equities.
According to a survey by Peel Hunt released today, which polled more than 500 institutional investors and City bosses at both listed and non-listed companies, nearly 60% of respondents would like to see the reform extended to include small and mid-cap listed stocks that sit outside the FTSE 100.
An almost equal proportion (59%) supported the abolition of 20% capital gains tax on UK-listed securities to end the separate treatment of capital gains on UK equities and UK government bonds or gilts.
Capital gains on investments in UK-listed securities are subject to capital gains tax, whereas gilt investments are not currently taxed for capital gains.
Peel Hunt data showed there has been a 20% decline in the number of UK-listed companies in the past five years as the capital “struggles to shake of a de-equitisation cycle”, it said.
Smaller listed companies were impacted the hardest, suffering a 28% drop in the number of companies in the FTSE Fledgling index during the same five-year period.
Charles Hall, head of research at Peel Hunt, said: “Our findings make plain that there is more that can be done to reverse the dispiriting trend of companies leaving the London market in recent years. There are simply fewer companies to buy shares in at a time when there is billions in retail capital which could be used to back small businesses and grow the economy.
“If the Chancellor is really serious about turning around that trend, then he has a variety of tax levers to pull to turn a vicious spiral into a virtuous circle. Politicians need to be bolder to put the UK’s economic engine back into top gear.”