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In today’s Spring Budget, the UK chancellor Jeremy Hunt unveiled plans to launch a British ISA, or BRISA, to combat stagnant stock market returns and “encourage more people to invest in UK assets”.
Hunt said the new individual savings account, with an allowance of £5,000, will be introduced after a consultation on its implementation. He did not reveal the cost of launching this product to savers but confirmed that the allowance would be in addition to the £20,000 that can be subscribed into an ISA.
The UK ISA, as the chancellor called it, will be a new tax-free product to invest in UK-focused assets to support savers and open up UK retail investment opportunities for individuals.
The Treasury's "red book" states: “Following the ambitious Edinburgh and Mansion House reforms, the government will go further to improve the competitiveness of the UK’s capital markets and unlock more private capital for the UK’s growth industries, including through launching a UK ISA to support savers and open up new investment opportunities for individuals.”
The Edinburgh and Mansion House reforms are both government initiatives to boost the attractiveness of investing in the UK, and encourage a saving culture. UK equities have struggled to maintain their popularity in recent years, with UK companies like Arm Holdings choosing to list in New York, and other London listed shares moving elsewhere. The success of US stocks like Nvidia and Tesla have also turned UK investors' attention across the Atlantic.
Hunt also announced the launch of “British Savings Bonds”, delivered through National Savings and Investments and due to launch next month, in April 2024. This product will offer a guaranteed interest rate, fixed for three years.
He says the government “welcomes recent market-led initiatives that open up new access routes to government financing for retail investors and will continue to examine ways in which it can support retail customers’ investment in gilts.”
British ISA Receives Mixed Reactions
This “Great British ISA” has been mooted for months prior to today’s set of fiscal announcements, and been the subject of mixed opinions from policy commentators and financial experts alike.
“In theory, that could provide a tailwind for UK equities if a significant number of investors invest extra money in UK stocks, pushing up prices,” says Russ Mould, investment director at AJ Bell.
“In reality, people can already invest as much as they like in UK shares via a stocks and shares ISA, so any benefit for UK companies is likely to be relatively marginal.
“Even if every single stocks and shares ISA holder using their maximum allowance went out and bought £5,000 of UK shares, that amounts to just 0.2% of the UK market’s aggregate value. In reality, most will just re-allocate money in their main ISA anyway in order to keep their overall UK exposure roughly the same.”
Richard Parkin, head of retirement at BNY Mellon Investment Management, adds that only 15% of ISA investors actually utilise the full £20,000 allowance: “We […] need to make sure the qualification rules actually drive additional UK investment. If not set up correctly we could just see existing UK equity investment used to access the higher allowance.”
Meanwhile, Natalie Bell, fund manager within the Liontrust Economic Advantage team, comments that while the ISA will be an important catalyst to help reverse the trend of persistent outflows, it needs to be followed by further action.
"We hope that this will be supplemented in due course by other important changes, such as encouraging more domestic investment by pension funds and reviewing the significant ‘red tape’ that comes with being listed to remove anything unnecessarily burdensome. Such initiatives would go a long way towards levelling the playing field for the UK as a primary stock market listing venue on the world stage.”
