Home > Stock markets > Scotland’s “ethical” stockmarket is a rather neat idea Scotland’s “ethical” stockmarket is a rather neat idea 08/07/2019 Edinburgh could be getting its stock exchange back
Ideas that are attractive-sounding but impossible to implement effectively never really go away. They just return in slightly different clothing every decade or so. Think, for example, of the land value tax. It’s brilliant – by taxing the value of land it could solve all our problems.
It has a burst of popularity every generation, but once everyone sees how hard it would be to implement it goes away again. It’s the same for flat rate taxes, for UK identity cards and for pretty much any sensible idea about the NHS or train services. In the 1800s every reasonable sized city in the UK had its own – Bristol, Cardiff, Glasgow, Liverpool, Sheffield, Dundee and Birmingham. In 1914 there were 22 exchanges, 11 of which survived into the 1970s.
The Scottish ones merged into a Scottish stock exchange in the 1960s and then into the London Stock Exchange in 1973. Birmingham’s market only shut down in 1986. Their disappearance made sense at the time. A 2016 paper on the matter, The rise and decline of the UK’s provincial stock market, 1869-1929 , put it down to a change in the types of firms listed in the UK.
The provincial markets had been happy homes to local railway companies and banks, but as these merged, so their number fell. At the same time, there was an increase in the number of businesses shifting headquarters to London, and more foreign companies listing there, too. People in the UK are not particularly engaged by the idea of stockmarket investing at the moment. They see investing in shares as akin to gambling.
They see the big companies listed on the big exchanges as distant, financialised, exploitative and obsessed with greenwashing over real environmental, social and governance issues. These impressions might not be entirely wrong, but they are nonetheless a very bad thing. That’s partly because pension freedom will not be kind to those who aren’t paying at least some attention to their money and partly because capitalism works best when everyone understands that they have a stake in it – and want to have a stake in it. In matching regional companies with regional savers so that investors feel both close to and as if they have some shareholder control over what they hold, local exchanges could change that.
They could also help with the UK’s funding gap. Those listed tend to be “those that are located in or near to London”. In the UK the fall is less dramatic but, nonetheless, there has been a fall of about 300 companies since 2015. This all sounds so absolutely marvellous that you won’t be surprised to know that the idea of bringing back regional exchanges pops up all the time.
They reckon they can solve some of these problems. There are mountains to climb – regulatory approval is a long way off and it will need to sign up eight to ten companies to launch.
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