Sweden, a welfare system that works and is affordable. A funded pension system that is forward looking and a country that is proud of the financial services it delivers to its population. To me, Sweden is a better model for financial services including British pensions and I’m glad that the FT’s Patrick Jenkins isn’t shy in praising the Swede’s stock market success.
Writ large, the Stockholm exchange — and the broader Swedish approach to the country’s equity culture — has much to teach the UK. Over a period of 50 years, a succession of tax policies, pensions launches and investment product innovations has spurred a vibrant equity culture in the country.
According to Fondbolagens förening, the local fund management association, fund investment is more popular in Sweden than anywhere else in the world, with eight in 10 Swedes invested in funds.
A thriving pensions market provides ready anchor investors for Swedish initial public offerings.
Market liquidity is also underpinned by widespread direct retail investment, much of it channelled through the ISK tax-efficient investment vehicle — which includes a SEK150,000 (€14,000) annual tax-free investment allowance. It is a rough equivalent of Britain’s ISA, though without the option to save in cash.
At the end of 2023, according to the OECD, there were 3.8mn unique dedicated investment savings account (ISK) holders, in a total population of 10.6mn. Returns have been impressive, too, especially over the long term. In recent years the US market might have been a runaway winner versus the rest of the world, thanks to its dominance of global tech.
But Nasdaq figures suggest that over the past half century or so, Swedish returns actually outstrip any other major market, delivering an 8.2 per cent total return, compared with 5.9 per cent for the US and 5.8 per cent for the UK.
None of this is news to UK and EU policymakers, who are painfully aware of the Swedish example. Mario Draghi’s landmark report on European competitiveness, published a year ago, urged the EU to incentivise stock market investment for households’ €1.4tn of annual savings, citing Sweden’s gold standard. For the general good, Europe must persuade its citizens to abandon their cash-under-the-mattress caution.
If two of the main benefits of hosting a big company’s UK stock market listing are the tax revenue it raises through stamp duty and the cachet of the listing itself, then drugs group AstraZeneca has just delivered another humbling blow to London as a financial centre.
On top of the symbolic humiliation, the decision by Britain’s biggest listed company to move its share listing to New York and leave only depository interests trading on the London Stock Exchange, will cost the Treasury an estimated £200mn in lost stamp duty (depository interests, securities that represent rights to shares listed elsewhere, do not attract stamp duty).
London’s revenge may come early next year if rival private equity group HG presses ahead with plans to list Norwegian software group Visma in London rather than on the exchange of its Scandinavian neighbour.
But in the meantime the UK must do far more to burnish its credentials — building on the mooted exemption of new IPOs from stamp duty to overhaul the whole antiquated stamp duty system and its penal treatment of UK company share purchases.
ISA rules need tightening to give an added incentive for share investment over cash. Without resorting to unwelcome mandation, pension funds should be incentivised to invest in UK stocks.
When Britain’s biggest listed company (AstraZeneca) sends the signal it did last week, everyone with an interest in the country’s future prosperity should take heed.
We cannot ignore our markets if we want to improve purchasing and trading for trustees and the funds they choose. Right now very few great British stocks are listing in London. Mightn’t we look at minnow Sweden for ways to progress?