Stamp duty a sticking point

ONE of the key tests for euro entry is the impact it will have on the City and financial services. Irritatingly for the pro-euro lobby, the London Stock Exchange is against the UK joining while stamp duty remains on share dealing.

Investors in UK-quoted stocks must pay 0.5% tax on the value of their trades, in contrast to most European nations where stamp duty is insignificant.

Clara Furse, LSE chief executive, fears that if we join the euro, cheaper dealing costs on the Continent will become more obvious and investors will shift out of UK shares.

Plans to create a streamlined, single financial services market by 2005 - a good idea in principle - have also thrown up widespread concerns.

Observers fear European bureaucrats will introduce layers of admininstration and costs that will damage City competitiveness. The European Commission was recently pushed into a U-turn over plans to force UK firms to report every quarter instead of every six months.

Execution-only broking is one area under threat. Proposed legislation, supposedly to protect small investors, will make it more expensive and complicated.

Changes to listing rules are also viewed with suspicion, amid worries they will discourage smaller firms from joining the junior Alternative Investment Market.