The London stock market is in crisis – and a “Great British Isa” is part of the solution.

A total of more than £43bn has been withdrawn from British funds over the past eight years or so. Pension funds are partly to blame: they have cut the percentage of their money that they invest in London-listed shares from 40pc to 4pc since the turn of the century. Last year and the year before saw a worrying acceleration in this trend.

Heavily depressed valuations are an inevitable direct consequence. Depressed valuations attract bargain-hunting buyers, with the result that too many fantastic London-listed companies have been taken private too cheaply, preventing investors from benefiting from their long-term compounding potential.

Incidentally, this is not simply a problem for stock market investors; it affects the public finances too.

Morrisons and Asda, before they were taken over by private equity, contributed £200m in corporation tax every year, according to Peel Hunt, the investment bank; since their acquisition their contribution has been zero. Listed smaller and medium-sized companies in particular have been disappearing.

This not only leads to a fall in tax receipts but also has a broader impact on the economy because listed companies need lawyers, auditors, consultants, PR agencies and other advisers.

Meanwhile, not enough companies are coming to the stock market to replace those being bought. Last year was the second-worst year for flotations since 1987according to Deutsche Numis, the broker.

The cost of financing for London-listed companies is 23pc higher than for an equivalent company that seeks to sell its shares overseas, according to analysis by Panmure Gordon, the stockbroker, so it is no surprise that British companies look to list elsewhere.

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