Chancellor of the Exchequer, Jeremy Hunt, delivered his Autumn Statement earlier this week (Wednesday 22 November 2023), announcing the Government’s plans for the economy. Overall, we welcome the direction of travel of the Autumn Statement and the focus on measures that will seek to improve the UK’s capital markets.
However, there is still much that needs to be done to divert capital from various sources into publicly traded growth companies.
Many of the 110 measures outlined in the Autumn Statement did not make it into the Chancellor’s speech itself, but nonetheless have important implications for the UK’s capital markets. In this note, we highlight some of the key developments that may be of interest to small and mid-sized quoted companies and public equity market participants in general.
EIS and VCT scheme extension
The Government has chosen to extend the Enterprise Investment Scheme (EIS) and Venture Capital Trust (VCT) sunset clauses from 6 April 2025 to 6 April 2035. We welcome this proposal as it shows the Government’s commitment to ensuring early-stage, innovative companies have access to the investment they need to grow and develop. The announcement will provide both companies and investors with certainty, improving levels of confidence at the smaller end of the market.
However, we made the proposal within our submission to the Treasury that the Government should be more ambitious and seek to update eligibility requirements and streamline the processing criteria to prevent delays. An opportunity to strengthen these valuable schemes has been missed this time around, but we will endeavour to encourage the Chancellor to reconsider this at the next fiscal event in the Spring.
ISA simplification
The Government has made several changes to Individual Savings Accounts (ISAs) as part of the Autumn Statement. These measures aim to simplify the ISA regime, and make them easier to use for investors and other market participants. The key changes include allowing multiple subscriptions to ISAs, enabling the partial transfer of ISA funds between providers, and the removal of the need to reapply annually. The changes will take effect from April 2024.
The Government also confirmed that the current entitlement limit of £20,000 for ISAs will remain for 2024-25, and has made some additional changes by incorporating Long-Term Asset Funds into Innovative Finance ISAs and other, minor changes to the regime.
Overall, the measures lack sufficient ambition. We, along with many other market participants, were strong proponents of potential measures to channel more ISA money into UK equities. However, we are optimistic that the debate around this is not yet over and will continue to press for an appropriate solution.
Pension reform
The Government has made positive strides on pension reform, as it introduces a series of measures aimed at achieving better outcomes for both Britain’s high-growth businesses and pension savers.
The reforms announced to pensions build on the Mansion House reforms announced during the summer, and seek to consolidate the pension market and encourage pension funds to invest further in a more diverse range of assets. The key elements include a DWP consultation on the consolidation of defined benefit (DB) schemes and the establishment of a Growth Fund within the British Business Bank.
Whilst these measures are broadly positive, the focus is predominantly on investment into private equity, venture capital, real estate and infrastructure.
Investment Research Review
There was only limited mention of the Investment Research Review in the Autumn Statement, with no developments being announced. However, the Treasury confirmed that the FCA will consult on the recommendations of the Review in 2024.
We will endeavour to engage with the FCA during the consultation period, particularly around the funding of the Research Platform to ensure that the cost does not fall on smaller companies.
NatWest share sale to retail investors
The Government confirmed that it will commit to fully exiting its shareholding in the NatWest Group depending on appropriate market conditions and ensuring value for money in sales. The Government also explicitly states that their intention is to fully exit its shareholding by 2025-26, providing a clear timeframe for the exit process.
The Government will launch the share sale to retail investors in the next 12 months.
Update to the Financial Reporting Council’s remit
The Government has written to the FRC to update its remit which emphasises the role the FRC should play in promoting growth and competitiveness. Additionally, regarding corporate governance reform, the Capital Markets Industry Taskforce’s work to reset culture through an “investor covenant” was welcomed by the Government in the Autumn Statement. The “investor covenant” refers to the set of basic principles guiding the collaboration between companies and investors.
The Government also expects this to be done with commitment from industry through additional funding to the Investor Forum. The Investor Forum is envisioned as a platform where investor groups can collaboratively discuss and implement new disclosures and metrics, fostering a more transparent and informed market environment. The Forum would seek to enhance effectiveness, reduce friction and increase competitiveness.
Stamp duty extension
The Autumn Statement introduced an extension of the Growth Market Exemption from Stamp Duty and Stamp Duty Reserve Tax that currently applies to markets such as AIM and the Aquis Stock Exchange.
However, rather than extending the exemption to smaller companies on other public markets, such as the London Stock Exchange Main Market as we suggested in our submission to the Treasury, the Government has instead opted to extend the exemption to smaller, innovative growth markets. This change will allow other FCA-regulated multilateral trading facilities, that are operated by investment firms, to access the exemption.
Prospectus reform
Regarding prospectus reform, the Government did not announce anything new, but again reiterated that it will shortly lay a statutory instrument (SI) to replace the retained EU law Prospectus Regulation with a new framework tailored to the UK.
The QCA has engaged heavily on this front, and recently contributed to the draft SI.
Capital allowances
The Government has announced that full expensing will be made permanent, having originally been due to come to an end in March 2026. The Government will also take this opportunity to determine how the capital allowances legislation could be simplified in consultation with industry.
This policy incentivises businesses across the UK to invest and grow by allowing them to fully expense the cost of qualifying plant and machinery investments in the year of investment. The reform positions the UK’s capital allowances regime as one of the most generous in the world.
If you have any questions in relation to any of the above, please get in touch with the QCA’s Policy team by emailing Jack.Marshall@theqca.com, Ben.Cornwell@theqca.com, or Iqra.Ahsan@theqca.com.
