The UK is at risk of becoming an “incubator nation” which creates promising start-ups before losing them to rival markets, John Healey has been warned.

The Chancellor has been told to take immediate action to revive the London stock market, as City leaders warned that the exodus of British start-ups is “not business as usual”.

The Capital Markets Industry Taskforce (Cmit), which is helmed by LSE chief executive Dame Julia Hoggett, issued the alert to Healey in its pre-Budget submission to the Treasury. 

The document warns that the dearth of new listings in London is a “strategic growth problem” which poses a challenge to the UK economy as a whole, not just the stock exchange.

“The UK is at a serious risk of becoming forever an incubator nation, exporting its greatest companies just at the point they become globally consequential,” the document, reported by the Sunday Times, is understood to say.

Cmit has handed a set of demands to the Chancellor which it says would encourage a glut of new listings and more prevent promising start-ups from being lost to other countries like the US.

The City chiefs acknowledged that Healey is unlikely to abolish stamp duty on shares because it raises £3bn for government coffers every year. But the levy could be removed for pension funds and individual savings accounts (ISAs), the group said.

IPO drought ‘problem for Britain’

Cmit said the Treasury should consider an inheritance tax relief on pensions invested in the UK over a 15-year period, though it sought to sidestep fears that pensions would be forced to invest in UK shares.

The government could mobilise as much as £125bn in equity by 2042 by introducing a 10 per cent tax credit on dividends required by pension funds, at an annual cost to the Treasury of up to £742m.

Cmit pointed to the £24bn sale of Cambridge-based Arm Holdings to Japanese conglomerate SoftBank as an example of the “shrinking” of London’s IPO pipeline.

Mark Austin, a capital markets lawyer and a member of Cmit, told the Sunday Times the group’s ideas would “mobilise long-term domestic capital into UK companies, while respecting a fiscally constrained environment and keeping cost capped, design choices voluntary and fiduciary duties intact”.

A suite of London-listed firms have quit the UK’s public markets this year, with the value of bids for listed companies totalling at least £70bn. Insurance firm Beazley, asset manager Schroders and property giant Segro are among those to have accepted takeovers.

Andrea Rossi, chief executive of FTSE 100 finance firm M&G, wrote in the Sunday Times this weekend that the “decline of London’s stock market” is a “problem for Britain”.

Alongside the exit of listed firms and promising start-ups, City chiefs have bemoaned a lack of big-ticket IPOs in London. Earlier this week, hopes of a £7bn float for high street giant Boots were scuppered by its sale to the billionaire Weston family.