The Association of Investment Companies has called on the chancellor to allow all UK-listed shares, including investment companies, to be eligible for the new £5,000 UK ISA which he plans to launch.

Leaping at the chance to give its members a boost from the UK or ‘British’ investment plan, AIC chief executive Richard Stone said: ‘We have more than 350 UK-listed investment companies, including more than a third of the FTSE 250. These companies provide access to diversified portfolios of equities, as well as hard-to-access assets like private companies, infrastructure and property.’

Including all London-listed investment companies, or trusts, in the remit of the new ISA could bolster demand for funds that have been hit hard by the surge in interest rates and inflation, as well as discriminatory rules on cost disclosure.

UK equity trust shares on average currently trade 8% below the value of their investments after investors dropped their historic UK bias to pursue global and US funds instead.

Meanwhile, stagflation and rising bond yields have helped depress infrastructure, real estate and private equity funds to deep double-digit discounts to net asset value.    

However, the only reference to investment trusts in the Treasury’s consultation paper is in relation to collective investment schemes where officials are considering reviving old ‘PEP’ or personal equity plan rules.

These only admitted authorised open-ended funds and trusts if they held 75% of their assets in UK companies, which would prevent them from applying to all listed closed-end funds as the AIC wants.

The trade body hopes the Treasury will categorise investment companies alongside operating companies as this will align the new ISA with ongoing reform to charge disclosure rules that have forced closed-end funds to ‘double count’ their expenses and make them look more expensive than open-ended funds.

Ken Wotton, manager of UK smaller companies trust Strategic Equity Capital (SEC ), said: ‘This policy could serve as a catalyst for closing the valuation gap in the UK market, offering a unique opportunity for taxpayers to participate in and benefit from the success of high-quality companies.’

Laura Foll, co-manager of Henderson Opportunities (HOT ), Lowland Investment Company (LWI ) and Law Debenture (LWDB ) at Janus Henderson, said: ‘A £5,000 additional allowance for investment in UK equities is a step in the right direction to encouraging a broader, domestic ownership base for UK shares, but it is only one comparatively small step.’

Shares in mid-cap trust Mercantile (MRC ) gained 2.2% this afternoon while small-cap fund BlackRock Throgmorton (THRG ) climbed 1.7%.

PEPs were introduced in 1986 under chancellor Nigel Lawson to encourage retail investment in UK assets, including investment trusts, and proved a huge success before they were replaced by ISAs under Labour chancellor Gordon Brown in 1999.