The UK needs £1tn of fresh investment over the next decade if the government is to hit its economic growth targets, a City taskforce has said.
The Capital Markets of Tomorrow report, led by the City veteran and former boss of Legal & General Sir Nigel Wilson, said that in order to achieve at least 3% annual growth, the UK would have to attract around £100bn of investment per year, divided between key sectors.
That includes £20bn-£30bn towards the UK’s housing stock, £50bn for the energy sector, and £8bn for water projects. It also calls for £20bn-£30bn worth of venture capital for growing companies that are beyond the startup stage and need more sustainable funding to expand.
The report said the challenge was to make the UK “a competitive market in which to invest”. While many initiatives to boost investment in British infrastructure and companies were already under way, it stressed that the government and regulators needed to focus on creative opportunities and providing incentives for investors. “The global pitch needs to be levelled,” it added.
“There has never been such a large amount of money globally available and seeking investment opportunities,” Wilson said.
“Capital pools include domestic and international capital sources, such as sovereign wealth funds, retail investment, private equity ‘dry powder’, and the UK is fortunate in that we have £6tn of long-term capital within our pension and insurance industries. In other words, the supply of capital for growth is available.”
That includes creating new investment funds through an existing long-term investment for tech and life sciences (Lifts) initiative to attract private cash, and ensuring that the £60bn-£70bn per year of tax breaks for annual pension funds is applied in a way that encourages investment in UK companies, the report said. It also called for the reintroduction of tax credits on dividends received from UK companies, which was scrapped in 1997.
Wilson’s report stressed that the UK needed to kickstart a culture in which everyday consumers were far more keen to take risks and invest their money in British companies than to leave it languishing in cash accounts. That could be aided by axing stamp duty on share purchases, and allowing companies to nudge people with large cash savings towards investments.
It called for a “streamlined” UK ISA that would allow people to invest a certain amount of money in British stocks, tax-free. While plans for a British ISA were floated under the last Tory government, reports this week suggest that the chancellor, Rachel Reeves, is poised to mothball the project before the 30 October budget.
The report was produced for the UK Capital Markets Industry Taskforce (CMIT), an influential body headed by the London Stock Exchange chief executive, Dame Julia Hoggett, alongside senior City figures including the bosses of the asset manager Schroders, the pharmaceuticals company GSK, the pension savings provider Phoenix Group and the venture capital firm Lakestar.
Hoggett said: “We have a great base in the UK on which to build, including world-leading universities and a highly regarded financial services sector. But the opportunities need to be seized.”
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Since its founding in 2022, CMIT has been pushing for changes to regulations that it believes have stifled investment, and have ultimately left the UK lagging behind the US in terms of developing capital markets – where money is raised for projects and companies – and economic growth.
The group has also been sounding the alarm over the growing number of companies that have been leaving or snubbing the London stock exchange for overseas rivals, including the US.
A Treasury spokesperson said: “The chancellor has been clear that difficult decisions lie ahead on spending, welfare and tax to fix the foundations of our economy and address the £22bn hole in the public finances inherited by the government. Decisions on how to do that will be taken at the budget in the round.
“We have already taken action to reinvigorate our capital markets and boost growth, including by announcing a pensions investment review to drive more investment in homegrown business.”