Please ensure Javascript is enabled for purposes of website accessibility
Back to Insights

Three reasons to be positive on UK small cap stocks following the 2024 Budget

In the 2024 budget, the government proactively addressed the UK equity market in several key areas…

Budgets may come and Budgets may go, but the 2024 edition brought some significant changes for UK investors and businesses. As ever, it will take time for the impact to feed through.

Nonetheless, we believe three key announcements paint a particularly positive picture for UK smaller companies. And, while this is one of the last Conservative budgets we expect to hear for some time, we would be surprised if Labour reversed any of the measures discussed here.

1. A brand new (British) ISA

The announcement of a British ISA will allow UK savers to invest an additional £5k of annual tax-free savings in UK listed assets. This is welcome news for the UK small and mid-cap market. The smaller companies segment has been plagued by outflows over the last few years. As investors have sold out of smaller companies more broadly, their valuations have fallen, due in part to them being harder to trade. The British ISA attempts to encourage increased investment into UK-listed assets, which includes these companies.

2. Mandating UK pension fund asset disclosure

The government will work with the FCA to demand UK defined contribution (DC) and local government pension funds disclose their holdings in UK equities. The government will review this data and if it shows that UK equity allocations are declining, they will look at options to reverse this.

Encouraging increased investment in UK equities are clear first steps taken by this government to reinvigorate the UK equity market. At the same time, increased investment in UK listed assets should enhance the attractiveness of the UK stock market to fast growing innovative companies. If this happens, it will allow UK pension funds to share in the capital growth and success of such companies. It is a virtuous circle.

3. A reduction in national insurance contributions

An additional 2% reduction in national insurance tax contributions will put more pounds in the pockets of UK consumers. This change will also take effect in the same month as the 12% reduction in the price cap for utilities and the 10% increase in the national living wage. An increase in real wages and disposable income should benefit the more domestic small-cap index which includes housebuilders, retailers and travel and leisure stocks.



Equity – A security representing ownership, typically listed on a stock exchange. ‘Equities’ as an asset class means investments in shares, as opposed to, for instance, bonds. To have ‘equity’ in a company means to hold shares in that company and therefore have part ownership.

Index – A statistical measure of group of basket of securities, or other financial instruments. For example, the S&P 500 Index indicates the performance of the largest 500 US companies’ stocks. Each index has its own calculation method, usually expressed as a change from a base value.



Not for onward distribution. Before investing in an investment trust referred to in this document, you should satisfy yourself as to its suitability and the risks involved, you may wish to consult a financial adviser. This is a marketing communication. Please refer to the AIFMD Disclosure document and Annual Report of the AIF before making any final investment decisions. Past performance does not predict future returns. The value of an investment and the income from it can fall as well as rise and you may not get back the amount originally invested. Tax assumptions and reliefs depend upon an investor’s particular circumstances and may change if those circumstances or the law change. Nothing in this document is intended to or should be construed as advice. This document is not a recommendation to sell or purchase any investment. It does not form part of any contract for the sale or purchase of any investment. We may record telephone calls for our mutual protection, to improve customer service and for regulatory record keeping purposes.

Issued in the UK by Janus Henderson Investors. Janus Henderson Investors is the name under which investment products and services are provided by Janus Henderson Investors International Limited (reg no. 3594615), Janus Henderson Investors UK  Limited (reg. no. 906355), Janus Henderson Fund Management UK Limited (reg. no. 2678531), (each registered in England and  Wales at 201 Bishopsgate, London EC2M 3AE and regulated by the Financial  Conduct Authority) and Janus Henderson Investors Europe S.A. (reg no. B22848 at 2 Rue de Bitbourg, L-1273, Luxembourg and regulated by the Commission de Surveillance du Secteur Financier).

Janus Henderson is a trademark of Janus Henderson Group plc or one of its subsidiaries. © Janus Henderson Group plc

Important information

Please read the following important information regarding funds related to this article.

Before investing in an investment trust referred to in this document, you should satisfy yourself as to its suitability and the risks involved, you may wish to consult a financial adviser. This is a marketing communication. Please refer to the AIFMD Disclosure document and Annual Report of the AIF before making any final investment decisions.
    Specific risks
  • If a Company's portfolio is concentrated towards a particular country or geographical region, the investment carries greater risk than a portfolio that is diversified across more countries.
  • Most of the investments in this portfolio are in smaller companies shares. They may be more difficult to buy and sell, and their share prices may fluctuate more than those of larger companies.
  • This Company is suitable to be used as one component of several within a diversified investment portfolio. Investors should consider carefully the proportion of their portfolio invested in this Company.
  • Active management techniques that have worked well in normal market conditions could prove ineffective or negative for performance at other times.
  • The Company could lose money if a counterparty with which it trades becomes unwilling or unable to meet its obligations to the Company.
  • Shares can lose value rapidly, and typically involve higher risks than bonds or money market instruments. The value of your investment may fall as a result.
  • The return on your investment is directly related to the prevailing market price of the Company's shares, which will trade at a varying discount (or premium) relative to the value of the underlying assets of the Company. As a result, losses (or gains) may be higher or lower than those of the Company's assets.
  • The Company may use gearing (borrowing to invest) as part of its investment strategy. If the Company utilises its ability to gear, the profits and losses incurred by the Company can be greater than those of a Company that does not use gearing.
  • Using derivatives exposes the Company to risks different from - and potentially greater than - the risks associated with investing directly in securities. It may therefore result in additional loss, which could be significantly greater than the cost of the derivative.