The UK needs £1tn of new investment over the next decade if the government is to meet its economic growth targets, a City taskforce has said.
The ‘Capital Markets of Tomorrow’ report, led by City veteran and former head of Legal & General Sir Nigel Wilson, said that to achieve annual growth of at least 3%, the UK would need to attract around £100bn of investment per year, divided into key sectors.
This includes £20-30bn for UK housing stock, £50bn for the energy sector and £8bn for water projects. It is also calling for venture capital of £20bn-£30bn for growth companies that are beyond the start-up stage and need more sustainable funding to expand.
The report says the challenge is to make the UK “a competitive investable market”. While many initiatives to boost investment in UK infrastructure and companies are already underway, it is stressed that government and regulators need to focus on creating opportunities and providing incentives for investors. “The global playing field needs to be leveled,” he added.
“Never before has there been such a large amount of money globally available and looking for investment opportunities,” said Wilson.
“Capital pools include domestic and international sources of capital such as sovereign wealth funds, retail investment, private equity ‘dry dust’ and the UK is fortunate to have £6m of long-term pension funds and our insurance branches. In other words, the supply of funds for growth is available.”
This includes creating new investment funds through an existing long-term investment in technology and life sciences (Lifts) initiative to attract private capital and ensuring that the £60-70bn a year of tax relief for annual pension funds is implemented in a way which encourages investment in UK companies, the report says. It has also called for the reinstatement of tax credits on dividends received by British companies, which were abolished in 1997.
Wilson’s report stresses that the UK needs to start a culture where everyday consumers will be far more willing to take risks and invest their money in UK companies than let it languish in cash accounts. This could be helped by removing stamp duty on share purchases and allowing companies to nudge people with large cash savings into investment.
It has called for the creation of an “enhanced” UK ISA that would allow citizens to invest a certain amount of money in UK shares, tax-free. While plans for a UK ISA were advanced under the last Tory government, reports this week suggest the chancellor, Rachel Reeves, is poised to scuttle the plan ahead of the October 30 Budget.
The report was prepared for the UK’s Capital Markets Industry Task Force (CMIT), an influential body led by London Stock Exchange chief executive Dame Julia Hoggett, along with senior City officials including the heads of Schroders, pharmaceutical company GSK, pensions provider Phoenix Group and venture capital firm Lakestar.
Hoggett said: “Mr: “We have an excellent base in the UK to build on, including world-leading universities and a highly regarded financial services sector. But opportunities must be seized.”
Since its launch in 2022, CMIT has been pushing for changes to regulations it believes have stifled investment and ultimately left the UK behind the US in the development of capital markets – where money is raised for projects and companies – and financial development.
The group has also sounded the alarm about the growing number of companies leaving or snubbing the London stock exchange to turn to rivals overseas, including in the US.
A Treasury spokesman said: “The Commission has nothing to do with the Stock Exchange: “The Chancellor has been clear that tough decisions will have to be made on spending, welfare and taxation to fix the foundations of our economy and address the £22 billion hole in the public finances
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Written by D Fernando
