By Charlie Conchie
Sir Graham Brady and some of Britain’s biggest firms, including Aviva and BAE Systems, are piling pressure on the chancellor to overhaul so-called share incentive plans and unlock a “new wave of employee share ownership”, City A.M. can reveal.
In two separate letters to Jeremy Hunt, seen by City A.M., a group of Tory grandees and some of Britain’s biggest listed companies have called on the chancellor to slash a five year ‘holding period’ in the schemes that they claim is hampering investment.
Share incentive plans offer workers a stake in their employer and allow them to reduce the amount of income tax, national insurance and capital gains they would normally pay on returns.
First rolled out in the UK in 2000, the plans have been used by big firms as a tool to retain staff by offering shares if they stay for a certain period of time. The current rules state that employees must hold the shares for five years.
However, the two letters to the chancellor sent at the end of last year, argue that the current time frame had become a “barrier” as staff typically move on before they feel any benefit.
“Job tenure is falling and many don’t expect to be at the same company for more than three years, let alone five, and for many companies tenure is also considerably shorter for lower paid workers,” said one of the letters, sent by share ownership group ProShare and signed by 41 companies including Abrdn, Aviva, BAE systems, Legal & General and Vodafone.
“With the prospect of penalties for early exit from the SIP, committing to a five year investment means the plan is not relevant for many employees, with the issue exacerbated for younger and lower paid groups.”
The second letter, written by Sir Graham Brady and Tory MP Jonathan Djangoly, and signed by a group of backbench MPs and peers, claimed the “simple reform” of reducing the five year period would help “unleash a new wave of employee share ownership for the next 20 years”.
“As you weigh up how to best re-energise employee share ownership plans we urge you to listen to the 40+ companies who are now also calling for this reform,” they wrote.
Brady has been campaigning on the issue for over ten years.
The letters reveal growing pressure on Hunt to act faster on retail investment after a slide in the amount of amateur investors backing British companies in the past two decades.
The Treasury launched a consultation on the share plans last year and said it was looking to “improve the schemes and expand their use by making it easier for businesses to set them up and offer them out to staff.”
In a statement to City A.M. yesterday, a spokesperson said it was “carefully considering the responses and evidence submitted and a response will be published in due course”.
As part of its push to revive the City this year, the government has been searching for ways to reignite a culture of equity ownership in the UK and revealed plans to offload its remaining stake in Natwest in the Autumn Statement.
However, the number of new share incentive plans offered to staff has slowed over the past decade. A total of 480 schemes from employers were approved in 2020/21, down from well over 500 each year in the decade to 2017/18, HMRC’s latest figures show.
