Press releases 2002
24 April 2002
EXCHANGE WARNS OF STAMP DUTY BARRIER TO EURO ENTRY
The London Stock Exchange today warned that stamp duty on share trading would increasingly damage London's competitive advantage in international financial services, and so reduce the likelihood of the UK joining the Euro.
Speaking on the globalisation of financial markets at the Institute of Directors' annual convention, Clara Furse, Chief Executive of the London Stock Exchange, described stamp duty as "one of the most blatant examples of an imbalanced playing field in Europe".
Furse explained that the growing integration of European capital markets would lead to a greater degree of price transparency and thereby highlight the higher cost of UK equities because of stamp duty.
With stamp duty in place, the resulting shift out of UK equities as this process developed would lead to an additional shift of business away from UK-based intermediaries, which could reduce the Government's tax revenues from such services by up to 3 billion per year.
She said that with stamp duty in place the UK could not pass the second of the Chancellor's five economic tests governing euro entry:
"This test is designed to ensure that the UK and London's financial markets would not be damaged by euro entry.
"I do not believe we could possibly pass that second test while the Government continues to levy stamp duty on share trading. Logically, this means the Government could not recommend euro entry while stamp duty remains.
"As the availability of capital becomes more global, imperfections in the market become easier to overcome by moving to the most efficient market. This has always been our great competitive advantage; let's not lose it."
She said of the Government's Budget statement last week: "We were very disappointed that there was no mention whatsoever of stamp duty."
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Notes to editors:
Clara Furse was speaking at 15:38 at the Institute of Directors' annual convention at the Royal Albert Hall, London on the subject of "Global Finance - View from the City". Copies of her speech are available at www.londonstockexchange.com/newsroom/speeches.asp
The Exchange has commissioned research that shows:
- The harmful effects of stamp duty to the UK economy;
- The economic benefits of abolition; and
- How abolition need not cost the Treasury 4 billion.
To view this research, visit: www.londonstockexchange.com/newsroom/default.asp
The Chancellor's second economic test for considering euro entry is: "What impact would entry into EMU have on the competitive position of the UK's financial services industry, particularly the City's wholesale markets?"