Dubbed the ‘world’s next Silicon Valley’ or ‘second only to Hollywood globally by the end of 2025’, who wouldn’t want to invest in the UK?
It’s a no brainer as far as chancellor Jeremy Hunt is concerned, so much so, he today confirmed rumoured plans to launch a brand new British ISA in today’s Spring Budget.
But will the British ISA take-off?
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What is the British ISA?
The new British ISA will be for investments in UK equities, giving savers the opportunity to take advantage of UK growth.
And to help encourage savers, Hunt slapped on an extra £5k tax free savings allowance for saving in a British ISA - taking the full allowance to £25,000 per tax year.
Great news for those who have maximised their ISA allowance and have a bit more they want shielded from the tax man - as long as they are happy for £5k to be dedicated to UK stocks.
Hunt said the British ISA means “British savers can benefit from the growth of the most promising UK businesses as well as supporting them with the capital to help them expand”.
At the same time, Hunt also said he wanted to see defined contribution pension plans to invest more in the UK, including private assets.
While it’s a clear move to boost UK economic growth, is an additional £5k enough to encourage savers to invest in the UK and where can we expect to see growth?
British investment opportunities
Nuclear technologies
If you're wondering where these opportunities in the UK may come from, then according to Hunt the UK is well placed to develop cutting-edge nuclear technologies and as such he announced that the Great British Nuclear will begin the next phase of the Small Modular Reactor (SMR) selection process, with companies now having until June to submit their initial tender responses.
According to the government, SMRs could transform how nuclear power stations are built and result in billions of pounds of investment in the UK
“Our brilliant Energy Security and Net Zero Secretary will also allocate up to £120m more to the Green Industries Growth Accelerator to build supply chains for new technology ranging from offshore wind to carbon capture and storage,” Hunt said.
Creative industries
With Idris Elba, Keira Knightley and Orlando Bloom all filming their latest productions in the UK, the UK can consider itself Europe’s largest film and TV production centre "and we will be second only to Hollywood globally by the end of 2025", Hunt said.
The sector, which includes high-end TV, will be boosted by tax reliefs and additional funding.
Life sciences
Hunt also flagged the growth in life sciences as the UK continues to support research by medical charities into diseases such as dementia, cancer and epilepsy with an additional £45m including £3m for Cancer Research UK.
However, Hunt said the UK should also be manufacturing and developing medicines and has announced a brand new investment by Astrazeneca, “led by mon ami, the irrepressible Sir Pascal Soriot”.
In support of the life sciences sector, £650m will be invested to help expand the UK’s footprint on the Cambridge Biomedical Campus and fund the building of a vaccine manufacturing hub in Speke in Liverpool.
Is a £5k incentive enough for a British ISA?
It’s no secret - UK equities have been unloved for some time, so much so, they were shunned by the MP’s pension scheme last year.
And experts have been quick to jump on the news, suggesting there may still be some work to be done to help attract more cash into UK businesses and that the British ISA will do little to stem the failing of the FTSE.
Barry Norris, manager of the VT Argonaut Absolute Return Fund, points out: “If you had invested £1 in the FTSE All Share Index a decade ago you would currently have 64p of profit, including dividends. But that same £1 invested in the S&P500 - the most representative index of American stocks - over the same time would have made a profit of £3.38p (over 5 times your money).
FTSE All Share Vs. S&P500 Total Return (in £ terms)
ISA simplification?
Eager savers may well argue that they would have preferred to have seen an overall increase to the annual ISA allowance rather than segregating £5k for UK investments.
Plus, does a British ISA just add to the complexity and could it result in a lower take up? Will savers really engage with a British ISA?
When will the British ISA launch?
We don't yet know when the British ISA will launch but it will be subject to a consultation first. In the meantime, from April 2024, ISA savers will be allowed to hold as many ISA subscriptions as they want as long as they stay in the current allowance of £20,000.
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Should you invest in UK equities?The FTSE 100 hit a record high this week, but UK equities remain unloved and undervalued compared to their global and US peers. Should you snap them up at a discount?
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State pension errors: DWP urged to check for mistakes among divorced peopleFormer pensions minister Steve Webb says there are a high number of divorced women on low state pensions. Now MPs want the DWP to check if there were any errors in “potentially underpaying men and women who are divorced”.
