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UK government throws down the gauntlet to institutions for a ‘big bang’ of UK investment

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Susannah Streeter, senior investment and markets analyst, Hargreaves Lansdown:

‘’The UK government has thrown down the gauntlet to institutional investors, challenging them to reassess their lack of love for UK assets. During a week when more overseas companies have circled British firms with acquisition deals coming thick and fast, it’s clear that the UK stock market is still perceived as underappreciated compared to US and European peers. Overseas pension funds are far more likely to benefit from long term UK investments than their British counterparts and this is what the government is intent on changing.

Britain’s Prime Minister and Chancellor want to see a big bang of investment which would provide a slow burn of capital heat to propel Britain’s recovery from Covid and its long term growth, but many institutional investors, and in particular pension funds, would argue the kindling needs to be laid first before the spark can take hold. That would include the removal of the cap on fees that defined contribution schemes can charge to ensure they are not over penalised for over performance, and that does now appear to be in hand, with the Department for Work and Pensions set on reforming this. The launch of the UK infrastructure bank should also help light the touch paper, to encourage joint investment in long term green schemes. But the biggest change is likely to come with the revving up of a new vehicle for investment management – the long term asset fund –  opening up possibilities of investment which until now have been restricted for UK pension funds.

We would expect many retail investors also to be interested in investing in more long term projects – particularly in powering the green industrial revolution and helping the UK become a science and tech superpower. We welcome their inclusion and the key to this will be to consider retail investors’ particular requirements and perspectives, ensure value, and create well governed products which deliver good outcomes. There will be keen eyes trained on the detail which is due to be released by the government in the run up to the Global Investment Summit in October.’’

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