What is wrong with UK shares? While the US, European and Japanese stock markets reach new highs, UK markets are stuck in a deep rut. The FTSE 1000 is just 10 per cent higher than it was on the last day of last century. As for the FTSE 250, small cap and AIM markets – which seemed to be doing okay until 2021 – they are still deep in bear market territory. The AIM 100 – the largest hundred shares on the Alternative Investment Market, which peaked at over 6000 in August 2021 is currently down below 3600. That is the sort of crash that happened to the wider stock market after the dotcom boom and the 2008/09 financial crisis, but has gone unnoticed because it is not reflected in global markets. It can’t be that all UK companies are useless – the proof of that is that UK companies that have switched their listing from the UK to the US have enjoyed an instant surge. Logistics firm Wincanton, whose share price had collapsed from 450 pence in 2021 to 200 pence a year ago has surged to over 600 pence on a takeover offer. Someone thinks it is worth rather more than the market does – and the same is true of other recent takeover targets.

Jeremy Hunt has had enough. If investors can’t see the value in UK shares, he is determined to make them hold more UK shares regardless. It is not so much overseas investors who have lost faith in the UK stock market as UK investors. Pension funds, which in the 1990s held 30 per cent of UK shares, owned just 1.6 per cent of UK shares in 2022. In advance of next week’s Budget, Hunt has announced plans to force UK pension funds to disclose how much of their money is held in UK shares – attempting, perhaps, to shame them into investing in more UK businesses.

It can’t be that all UK companies are useless

But it is unlikely to end there. It has been rumoured for a while that Hunt is introducing a ‘British ISA’ that would give investors an extra allowance on top of the current £20,000 a year maximum, only to be invested in UK shares. This would be like the Personal Equity Plans (PEPs) introduced by Nigel Lawson and which were the forerunner of ISAs – they, too, could only be invested in the UK.

But Bloomberg is reporting that instead, or as well as, this carrot, the Chancellor could be planning to wield a stick. It seems that Hunt is considering removing the tax advantages on ISA funds that are already invested in overseas companies. In other words, existing ISA holders could be either forced to pay tax on their overseas holdings – or forced to sell them and reinvest the money in UK shares.

There is a rumoured to be a disagreement in Downing Street over this – with the Prime Minister against any move to try to influence how people invest their money. It would certainly go against most investment advice, which tends to favour diversification across different asset classes and markets.

It is hard to imagine that, if left alone, the market will not at some point right itself: that investors in the UK and overseas will suddenly come round to appreciating just how cheap UK shares are and will start piling into them, pushing up prices. Investment does tend to go in fashions, with today’s success story liable to turn into tomorrow’s tale of misery – and vice versa. When the inevitable rebound happens with UK shares it is unlikely to be precipitated by the Chancellor.