Is the UK stock market in trouble and needing reform or abolition

10th July 2025

The UK stock market isn't on the brink of abolition — but it's definitely under pressure and in need of reform.

The London Stock Exchange is still one of the largest and most liquid markets globally. But without bold reforms, it risks becoming irrelevant — not extinct, but sidelined.

What's Going Wrong?
Declining Listings:
Fewer companies are choosing to list in London. In 2024, 88 firms left the market while only 18 joined.

Capital Flight:
Big names like Flutter, Arm, and Wise have opted for US listings, chasing better valuations and deeper capital pools.

Investor Apathy:
UK pension funds and retail investors are pulling back from domestic equities. Exposure dropped from 45.7% in 1997 to just 4.2% in 2022.

Liquidity Crisis:
Less trading activity means lower valuations and less appeal for new listings.

What's Being Proposed?
Stamp Duty Reform: Scrapping the 0.5% tax on share purchases to boost participation.

ISA Overhaul:
Replacing cash ISAs with equity-focused incentives to get Brits investing in UK companies.

Listing Rule Simplification:
Merging premium and standard segments to make it easier for companies to go public.

Cultural Shift:
Campaigns like "Save Our Stock Market" aim to reignite public interest in investing.

Government Subsidy Framework: The UK operates under the Subsidy Control Act 2022, which allows public authorities to award financial support to businesses — including grants, loans, and tax breaks — as long as they meet specific criteria and don't distort competition.

Targeted Support:
In recent years, the government has pledged £4.5 billion in subsidies to boost British manufacturing, with funding available from 2025 for five years.

Market Sensitivity:
Political tensions and fiscal uncertainty have made investors jittery. The government is trying to maintain tight fiscal rules to avoid repeating past market meltdowns, like the one triggered by Liz Truss's unfunded tax cuts in 2022.

Impact of UK Stock Market Reforms Investments
Key reforms currently proposed or underway could reshape returns, costs, and opportunities for portfolios.

1. Lower Trading Costs and Faster Settlements
Abolition of Stamp Duty (0.5% on UK equities) Removing this tax immediately cuts transaction costs, making frequent trading in UK stocks cheaper and boosting liquidity2.

Accelerated Settlement (T+1 by October 2027) Trades will settle one business day after execution instead of two, reducing counterparty risk and freeing up capital more quickly for reinvestment.

2. New Equity-Focused ISA Incentives
UK Equities Investment Scheme A proposed 20% income-tax relief for UK shares held in an ISA for at least three years could turn every £1,000 invested into £1,200 of buying power, assuming full relief — making long-term equity exposure more attractive for retail savers.

Reallocation of Cash ISA Allowances Redirecting the £20,000 annual Cash ISA limit into Stocks & Shares ISAs could channel billions into UK equities, amplifying both potential returns and volatility for everyday investors4.

3. Broader Market Depth and Deal Flow
Simplified Listing Regime (ESCC category) Merging premium and standard segments and easing disclosure for dual-class shares encourages more IPOs and secondary listings, expanding your investable universe with new tech and growth companies.

Tax-Deductible IPO Costs Making flotation expenses tax-deductible lowers barriers for companies to go public, likely increasing the frequency of UK IPOs and offering you earlier access to high-growth opportunities.

Encouraging Secondary Listings Incentives for Asian and US-listed firms to list in London can boost blue-chip turnover and diversify sector exposure within the FTSE indices6.

4. Enhanced Research Coverage and Stewardship
Revamped Research Payment Models Introducing flexible ways to pay for equity research aims to restore coverage of small- and mid-caps, giving you better insights when selecting under-followed stocks.

Updated Stewardship Code Stronger engagement rules for major shareholders may improve corporate governance, potentially reducing downside risk from surprise board decisions or opaque capital raises.

For a view of an expert Richard Murphy go HERE