So, as a member of Enterprise Britain, you have had a crappy week, fighting a system that could not care a fig about you and going to bed each night with a mental cash flow in your head. Your dreams have been centred on getting cheques in the post from your debtors.
Great news and this is not a dream…..
There is going to be a revival in the smaller share markets
These are the reasons why:
1. Lower interest rates. They are here for some time and cash holders are going to seek better returns. Please remember that capital gains tax (“CGT”) has been reduced from 40% to 18%. Institutional funds will flood into the main market stocks meaning higher prices and lower yields. The real gains will be in the smaller markets and when you make profits you will pay only 18% (less the annual CGT allowance) tax.
The reduction of CGT will encourage short term trading. This will lead to more financial press cover which will encourage the private investor to start trading again.
2. The tax incentive schemes. The Enterprise Investment Scheme (“EIS”) applies to certain UK shares on unquoted markets (Aim and PLUS-quoted). If you invest £10,000 in an EIS scheme and you are a higher rate tax payer you get £2,000 cash back from the Inland Revenue and all dividends AND capital gains are tax free. These schemes will encourage the revival of smaller market shares.
3. Venture Capital Trusts (“VCTs”) will be improved. These are similar to EIS schemes but are funds run by professional investment managers who select the qualifying investments. In the early 2000s at one point the upfront tax relief was 40% IE. if you invested £10,000 into a VCT you received a tax rebate of £4,000.
VCTs in recent times have been restricted by stringent qualifying requirements but the Government can be expected to reverse these.
(Please note that the EIS and VCT schemes are more detailed than as explained and you must obtain professional advice before considering any investment of this type)
4. A New Era of Privatisations. It is probable that the Treasury are already planning a new era of public privatisations. In the 1980s the Thatcher Government created an army of private investors by selling off a number of Government assets – water, gas and electricity amongst them.
The Treasury will privatise their bank and insurance holdings (and anything else they can think of) in their efforts to reduce the National Debt.
They will do it well and it will result in a renewed surge of interest in shares.
All this means that there will be a revival in interest in smaller share markets and higher risk shares will regain support. It will result in equity finance becoming more popular allowing members of Enterprise Britain to generate the right finance for their businesses.
No, you are not dreaming and the even better news is that it will happen more quickly than you might imagine.