The introduction of a UK Isa would not be a "silver bullet" for equities but could play some part in reviving the market, according to Peel Hunt.
A note, written by Peel Hunt's head of research, Charles Hall, said the new Isa could drive around £4bn more investment into UK companies.
He said: "The UK equity market has a systemic issue, with negative fund flows driving low valuations, resulting in heightened de-equitisation through M&A.
"A UK ISA is not a silver bullet, but an important element in resuscitating the equity market. We estimate it could drive £4bn per annum of additional investment in UK companies."
The Isa was announced by Jeremy Hunt in the Budget back in March and would see an additional £5,000 allowance to be invested in UK assets.
Hunt said the decision to introduce the Isa was made after consultation with more than 200 representatives from the City and high growth sectors.
Hall added the UK Isa could be more attractive to investors if it was exempt from inheritance tax.
He said: "The impact on annual IHT revenue would be modest, but it would make the UK Isa compelling."
A consultation on the proposal is set to run until June 6.
The note went on to "strongly recommend" interested parties to contribute their views to the consultation.
tara.o'connor@ft.com
What's your view?
Have your say in the comments section below or email us: ftadviser.newsdesk@ft.com
