Jeremy Hunt under pressure from high-level City taskforce to unlock hundreds of billions of pounds’ worth of funds to back UK growth
Under pressure: Chancellor Jeremy Hunt
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Jeremy Hunt has come under pressure from a high-level City taskforce to unlock hundreds of billions of pounds’ worth of funds to back UK growth.
The Chancellor is being urged to help encourage more of the £4.6 trillion managed by pension schemes and insurers to be invested in businesses.
The intervention, days before Hunt unveils his first Budget, comes amid soul-searching over the UK’s apparently diminishing status as a place for companies to flourish or list on the stock market.
It was highlighted by the recent decision of Arm, the Cambridge-based chip designer, to opt for Wall Street as the venue for its £50billion float.
At the same time, entrepreneurs are frustrated about Britain’s poor record of translating its enviable reputation for innovation and exciting start-ups into so-called ‘scale-ups’ that can turn into world beaters. Often they move abroad instead or are snapped up by foreign companies.
Today, a letter to Hunt on behalf the Capital Markets Industry Taskforce (CMIT) – set up last year in consultation with the Government to deal with the issue – highlights the ‘alarming’ collapse in the amount of ‘risk capital’ being invested in UK assets by UK pension schemes and insurers.
It notes that, in 2000, 39 per cent of all shares listed on the London Stock Exchange (LSE) were owned by such institutions but, by 2020, this had fallen to 4 per cent. Instead, much of the cash has been shifted into bonds and property.
‘The result of this has been both poorer returns for UK pensioners and, importantly, that UK pensions are not being utilised to drive the growth of the UK economy,’ said the letter, which is signed by Peter Harrison, boss of asset manager Schroders, and Andy Briggs, who leads pensions giant Phoenix, on behalf of the taskforce, which is chaired by LSE boss Julia Hoggett.
It highlights two key changes needed. One is the much-delayed Solvency II set of reforms, allowing insurance firms to deploy more risk capital. Another is the need to consolidate thousands of smaller pension schemes.
Hoggett said: ‘This debate affects everyone. Every pound put to work in the UK’s capital markets drives economic growth, benefiting businesses and savers alike.’