The Chancellor announced an additional £5,000 uplift to the ISA allowance for investment in UK companies. Plenty had hoped for something more substantive. The latest HMRC data shows that subscriptions were made to around 3.9m stocks and shares ISAs in the 21/22 tax year. Of those, the average subscription per account was £8,690. Most people aren’t maxing out their allowance anyway, almost certainly because they don’t have enough money to do so.

That said, previous surveys suggest that around 20% of people do use the full allowance, so may be tempted to put in more given the opportunity. A Sanlam study showed that around half of those with at least £50,000 of investible assets used their full annual ISA allowance of £20,000. Robin West, manager of the Invesco Perpetual UK Smaller Companies Investment trust, points out that if just 200,000 ISA investors allocated this additional £5,000 to the UK smaller companies’ sector, the £1bn of extra funding would represent a sector record over the last two decades.

However, it would take more to touch the sides of the outflows for the wider UK market. The UK market has been in outflow since 2016. The pace accelerated in 2021 and 2022, with net retail outflows from the UK market of £5.3bn and £11.95bn respectively. For the first three quarters of 2023, there were another £10.9bn in outflows. Against this backdrop, the sums involved in the British ISA look anaemic.

The Chancellor will be hoping that it is not the amount that’s matters, but the direction of travel. If it drives flows into UK equities at the margin, it will create some self-sustaining momentum. Gervais Williams, head of equities at Premium Miton Investors, believes this is plausible: “Although the Budget proposals might appear marginal, we believe they are pushing at an open door, and hence will have a disproportionately favourable impact.”

More ambitious hopes to remove stamp duty on UK shares and investment trusts were not in the Budget, even though industry leaders had warned that this lopsided tax has a dampening effect on liquidity. As it is, the UK ISA is a step in the right direction, but it may take more to turn round the UK market.