A British Isa would be a welcome addition to the Budget next week, one fund manager has said.
Chris McVey, senior fund manager of Octopus Investments’ UK Multi Cap fund, said a British Isa would boost the UK’s growth market.
There were first rumours of the special Isa ahead of the chancellor’s Spring Budget last year, but the plans never emerged.
If introduced, the British Isa would see an additional £5,000 tax-free allowance for UK-listed equities, on top of the current £20,000.
McVey told FT Adviser: “I hesitate to guess what that would look like but these sorts of initiatives can bring flows into small companies.
“We have a growth equity market in the UK which is trading at half the multiples compared to its international peers.
“Anything like a British Isa would result in that gap closing. From our perspective it is exciting.”
McVey added: “We have had negative flows from UK small companies since market peak in 2021.
“Anything which can help stimulate flows into that end of the market is good.”
Earlier this month, the Financial Times reported that Treasury officials have raised the idea of a British Isa with investment platforms.
McVey said: “The UK market is so cheap it is well below its long-term average multiples. Small caps in the UK are also trading at a discount against large cap peers.
“These are valuations we haven’t seen since the financial crisis.”
But others in the industry have branded the idea a "gimmick".
Tom Selby, director of public policy at AJ Bell, said restricting extra Isa allowance to UK investments would complicate things for investors.
He said: “This feels more like a gimmick than long-term policymaking in the interests of savers and investors.
“A much simpler solution would be to increase the overall Isa allowance and leave individuals with the freedom to invest in a way that suits their needs and appetite for risk."
tara.o'connor@ft.com
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