Prime minister Boris Johnson and chancellor Rishi Sunak have vowed to overhaul rules governing Britain’s huge asset management industry to make it easier to firms to invest in the UK.
The pair issued a rallying cry to Britain’s investment industry on Wednesday night, calling for money managers to plough more cash into British businesses and assets.
The prime minister and the chancellor sent an open letter to senior investment industry professionals, calling for an “investment Big Bang” to help drive the country’s recovery from COVID.
“Currently global investors, including pension funds from Canada and Australia, are benefitting from the opportunities that UK long term investments afford, while UK institutional investors are under-represented in owning UK assets,” the pair said in the letter.
“While we are glad that international investors prize UK assets, and are working hard to attract even more inward investment, we also want to see UK pension savers benefitting from the fruits of UK ingenuity and enterprise, being given the opportunity to back British success stories, and secure higher returns and better retirements.”
The UK has one of the biggest asset management industries in the world, with over £8.5tn ($11.8tn) of money managed in Britain. Despite this, UK investors are underrepresented in both public and private markets domestically. Stats show overseas investors own around 55% of the UK stock market, with a similar proportion of non-listed assets.
Johnson and Sunak said this was partly to do with rules governing allocations of fund and retail money. The pair said they were looking to reform rules where possible.
“We need an Investment Big Bang to unlock the hundreds of billions of pounds sitting in UK institutional investors and use it to drive the UK’s recovery,” the pair wrote. “It’s time we recognised the quality that other countries see in the UK, and back ourselves by investing more money into the companies and infrastructure that will drive growth and prosperity across our country.”
The language used echoed the “Big Bang” of the 1980s in the City of London, when a wave of deregulation led to the creation of the modern financial services industry.
Plans for deregulation of asset management to spur inward investment were cheered by the industry.
“Opening up access for investors to long term projects such as infrastructure and new technologies is a positive move that will benefit pension savers,” said Chris Cummings, the chief executive of the Investment Association.
“It is welcome news that the government sees this opportunity and is working to make it easier for institutional investors to invest in the country’s long-term growth.
“Certain retail investors should also be allowed to access the same opportunities as well.”
Anne Richards, chief executive of US investment giant Fidelity International, said she could “see the benefits of making long term, less liquid assets available to both our [defined contribution pension] and retail customers.”
“We also believe our customers will welcome more choice and access to a wider investment universe,” she said in a statement.
The call to action came on the same day that Legal & General, one of the biggest investors in the UK stock market, reported a bumper half-year profit of £1.1bn that beat forecasts. Nigel Wilson, the life insurer’s chief executive, said: “We are one of the biggest believers in the UK”.
Simon French, chief economist at stockbroker Panmure Gordon, said the proposals would likely drive down the cost of capital for British businesses but “wouldn’t increase total investor returns”.
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