Industry calls for stamp duty abolition to reverse London market decline
The Association of Investment Companies has called on Chancellor John Healey to abolish stamp duty on share trading and reverse cuts to venture capital tax relief, warning that decisive action is needed to unlock economic growth and prevent further damage to the London stock market.
The proposals come as the Chancellor prepares his first Budget since taking over at the Treasury, with the investment industry pressing for measures to reverse what it describes as a troubling decline in Britain's financial markets.
"Decisive action is needed to unlock growth," said AIC chief executive Richard Stone. "The UK needs more investment if it is to deliver the Chancellor's ambitions for greater productivity and economic growth."
Stone added that growth would be accelerated by creating an investment culture in the UK, "turning the country from a nation of savers to a nation of investors."
London market under pressure
The calls for reform come against a backdrop of mounting pressure on the London Stock Exchange. The number of listed companies has plummeted from 2,429 in 2015 to just 1,534 in May 2026, marking a decade low according to LSE data compiled by Statista.
Meanwhile, mergers and acquisitions activity has surged, with total UK M&A value more than doubling to £124.2 billion in the first half of 2026, according to analysis by PwC and AJ Bell. Foreign acquirers accounted for approximately 86 per cent of total deal value, their highest share on record.
Some £80 billion worth of takeover deals have been agreed this year alone, with targets including Easyjet, Schroders, Beazley, Segro, Tate & Lyle and the owner of William Hill. Five FTSE 100 companies have accepted take-private deals in 2026, including Schroders, Intertek and Beazley, with bidders offering an average premium of 45 per cent.
At the same time, a shortage of new initial public offerings means companies leaving the market through takeovers are not being replaced, creating what critics describe as a "hunting ground" for foreign predators seeking undervalued British businesses.
Stamp duty creates competitive disadvantage
The AIC's primary recommendation is the elimination of the 0.5 per cent stamp duty charge on UK share purchases. Currently, investors pay £50 in tax when buying £10,000 worth of shares in companies such as Rolls-Royce or Marks & Spencer, but nothing at all when purchasing US stocks.
This disparity puts London at a significant competitive disadvantage. Major US exchanges including the New York Stock Exchange and NASDAQ do not impose stamp duty on share transactions, making British equities comparatively expensive for investors.
"The Chancellor should start by setting out a plan to remove stamp duty by the end of this parliament," Stone urged. "Stamp duty is a tax on people investing in the UK. It makes London's stock market less attractive to both companies and investors."
The levy currently generates substantial revenue for the government. HMRC collected £3.05 billion in Stamp Duty Reserve Tax on share transactions during the 2024-2025 financial year, representing a 33 per cent increase from £2.295 billion in 2023-2024.
The government is already planning to reform the system, intending to replace the current stamp duty and SDRT structure with a single Securities Transfer Tax from 2027, though maintaining the 0.5 per cent rate while changing the payment mechanism to a self-assessed online portal.
"Scrapping it would bring in more private capital, benefitting the economy and the UK's public finances – and sending a strong message that the country is open for business," Stone argued.
Venture capital relief under threat
The AIC also called on Healey to reverse his predecessor Rachel Reeves' decision to reduce tax relief on venture capital trusts from 30 per cent to 20 per cent. The cut, which took effect in April 2026, is expected to save the Treasury approximately £125 million by 2027-2028.
However, the industry warns this modest saving could prove counterproductive. When VCT income tax relief was previously reduced from 40 per cent to 30 per cent in 2006, fundraising by venture capital trusts collapsed by two-thirds and did not recover for more than a decade.
"We need to make sure we are supporting our most ambitious companies," said Stone. "Venture capital trusts play a vital role in helping companies scale up while remaining in the UK, contributing to the domestic economy."
He added that the cut to VCT tax relief "made the scheme less attractive and will result in lower funding for the companies with the highest potential. The Chancellor should use his Budget to restore VCT tax relief to its previous level."
Political context
The recommendations come at a sensitive moment for the Chancellor. In his first major speech in the role last week, Healey insisted he wanted the UK to be a "country of wealth creation."
However, those comments were overshadowed by the announcement of 4,000 job cuts at Jaguar Land Rover and the departure of hedge fund tycoon Chris Rokos, who paid £330 million in tax last year, to Greece ahead of possible further tax increases in next month's Budget.
Healey, who previously served as Financial Secretary to the Treasury from 2005 to 2007 and Economic Secretary to the Treasury from 2002 to 2005 under Tony Blair before becoming Defence Secretary, faces the challenge of balancing growth ambitions with fiscal constraints.
The AIC's proposals represent what Stone called "practical measures" to reverse the tide and boost investment in UK companies, though they would require the Chancellor to forgo significant tax revenues at a time when the government's debt burden approaches £3 trillion.
