Richard Wilson, Interactive Investor CEO on Saving the UK Stock Market | Bloomberg Talks

Well, first of all, the elections historically, I think six of the elections since 1980 have been down to under 150,000 voters, so we're in another very close call. I'm no better than anyone else at speculating on the outcome. What the markets will want is clarity, and there's a risk that, as we've seen in a couple of elections in the last couple of decades, it becomes litigious. If it's not clear, then we'll have risk off. But beyond that, historically, when there has been a clear outcome, that's been very strong for US equities at least for a period, irrespective of which side of the house you're on. I'm not going to call what the latest betting is because that moves around. But job one is clarity, and then second, depending who comes in, everyone believes that if Trump comes in, you'll have a stronger dollar, you'll have stronger equities, higher deficit through higher borrowing, and lower taxes. And if Harris gets in, there's a sense you'll have a softer dollar, less borrowing, and the US equity market will be up but not as strongly.

There has been a little bit. Certainly much more activity. I think we've got 50% increased activity on US markets compared to the norm, and certainly much more than on the UK markets. But you're taxed on UK markets, so you get a bit less volume. Not obvious is the answer. There's a clear Trump trade to back the Magnificent Seven and of course the large US stocks drive the two primary indices. I mean, Nvidia and Apple kind of call the index. So you've got some activity around that. But we're sort of small fry in the UK compared to the US market, so not much to say.

Well, the majority of the changes were very well telegraphed. You've got a spend, tax, and borrow agenda with numbers that are very high. The IFS and the OBR came out and confirmed that that leads to lower growth going forward, a higher debt servicing burden, and of course the gilt markets have been a little bit ambiguous about their view of that because the yields have gone up in two and ten years. That basically makes the UK a less attractive market to invest in versus others because you've got a higher tax burden. And the irritation I think for many of us is that whilst there's clearly a fiscal tightrope to walk, going after some what would be symbolic or ideological taxes like IHT reliefs on agriculture and business property do undermine entrepreneurship in the country. We've got millions of people where the bedrock of our future is entrepreneurship, which comes from family businesses. That's not a sensible way to build growth. It flies in the face of your growth agenda.

I mean we're in a very competitive environment. And the option we're competing with all the neo-brokers, the US houses, the UK clearing banks, the European houses, everybody, the pension companies. Our option to move price is zero. So then you're dealing with efficiency or wages or reduced profitability. I think Rachel Reeves in one interview said you know companies will become more efficient, as if we're not trying to do that every day already. So the reality is it'll either be lower profits and therefore lower return and lower ability to reinvest in technology, or you look at your wage bill thinking how the hell do I solve that.

Yeah, I think well there are two... There's a problem that the UK has which is compared to some other countries, you know Canada and Australia are referenced quite a lot, we have a fragmented pension stock. So the actual size of the pool that you're allocating is not as large as it should be. So there's a task there which is to consolidate pension assets with a big opportunity across local councils and public sector has been well documented. The fear that we should have is forcing an allocation of risk which is disproportionate that would conflict with your risk management and the members of your long-term pension holders, so that's not a sensible thing to do. But Labour will say how do you get growth, and people have been complaining about the fact that the UK market is undervalued and that we've seen a massive decline in investment in UK stocks. So there are two things there for me: one is you've got to create the scale of pension assets so that you can make an allocation which is proportionate to a much bigger base, and secondly we've been bleeding out the UK stock market with stamp duty for the last 20 years. The previous government didn't sort it either. I'm not sure it's too late, it may be too late to save it. We are taxing the thing out of existence. The UK stock market is untradeable. You are taxed to invest in UK companies and it's tax-free to invest in US. It's not complicated.