ICAEW recently responded to Professor Kay’s call for evidence on UK Equity Markets and Long-Term Decision Making.
We have challenged two implied assumptions in the call for evidence: that short-termism and the internationalisation of UK shareholding are necessarily bad things.
While we believe that taking a long-term view is necessary for a sustainable business model, sometimes short term measures are required in order to preserve a business for the long term; and we believe that as an international centre for finance, the UK must continue to be an open market to overseas capital.
There are two areas where we would like to see further research:
- in the ability of smaller companies to access capital markets, important as smaller companies are expected be a vital part of the UK’s growth prospects;
- and the environment for holding shares, both for retail investors and institutions. This would include stamp duty and capital gains tax; the nature and form of information companies provide to shareholders; and the level of engagement between companies and their management with shareholders.
We would like the Kay Review to explore further whether reforms in these areas are required, although there would be a need to guard against unintended consequences.
While we support the objectives of the review we are concerned that in the current economic climate firms will not prioritise producing a response. There are many market participants such as the pensions regulator and the charities commission as well as organisations that provide credit and other sources of capital that have a valid contribution to make and we hope that they will be consulted.
We are ready to work with the Kay Review as it deliberates the findings from the consultation and look forward to the interim report early next year.