The investment industry is primed to support the government’s growth agenda
Taking risks is essential to economic growth, but too many people are missing out on the opportunities investment can bring, says Chris Cummings
The anticipation in Mansion House was palpable as Rachel Reeves delivered her first address to the financial services industry last month. As leading figures across UK business and government listened to the Chancellor pledge to drive economic growth and boost competitiveness, the critical role long-term investment, and the investment management industry, would play was clear.
Already channelling £1.4 trillion into the UK economy, if mobilised correctly, the investment management industry is primed to support the government’s ambitious growth agenda.
There are three important roles our industry can play in helping to create a world-leading economy that not only drives growth and improves people’s financial futures, but also keeps us competitive on a global stage. Firstly, channelling productive capital into more British companies and infrastructure projects. Secondly, building financial resilience through a culture of inclusive investment. And finally, recalibrating our approach to risk across the financial services landscape.
Keeping pace with change
The world in which we live and work is fundamentally changing, and we must evolve to ensure the UK remains an attractive place to list, invest and do business. Public markets must be reinvigorated through reform that increases competitiveness and drives more high-quality IPOs. Much has been achieved with recent listing reforms but IPOs remain one of the few areas in modern capital markets still reliant on manual processing. It is high time we automate this system.
Government proposals to broaden access to private markets through Pisces – a new market for private company shares – signal a positive shift towards an innovative and growth-led mindset. Taking this to the next level and delivering much needed infrastructure investment will depend on ensuring a pipeline of “shovel ready” projects, and improvements to planning processes that unlock development.
An inclusive investment strategy
Too many people in the UK are taking one of the biggest financial risks of all: taking no risk. Recent Investment Association research found that only one in five people hold Stocks and Shares ISAs, whilst two in five aren’t confident they would know how to open and place their money in one. Far too many are missing out on the long-term benefits investing can bring. That’s why we’ve called on the government to establish an inclusive investment strategy.
Our proposed strategy calls for a simplified ISA regime that makes investment more accessible, and reform to risk disclosures on investment products to inform and empower consumers. If we bridge the gap between cash savings and long-term investment, households will have better financial futures, and more money will be channelled into the wider economy, in turn funding businesses and infrastructure.
Resetting risk
Finally, this agenda must be underpinned by a recalibration of risk across the financial services industry. In efforts to increase consumer protections following the global financial crisis, we have moved too far towards ‘safetyism’ – an overfocus on eliminating risk without considering the unintended consequences. Appropriate risk in the system is a positive and growth-oriented necessity – and it was good to see the Chancellor recognise this in her speech.
We have moved too far towards ‘safetyism’ – an overfocus on eliminating risk without considering the unintended consequences
Finally, thinking back to Mansion House, I was struck by how much change its four walls have seen. Our world has evolved at pace: social demographics are shifting, our climate is changing, and AI is revolutionising technology.
If businesses are not at the forefront of this change, we will be left behind. The government’s commitment to growth and competitiveness has given us an ambitious mandate for economic growth. It is up to government, regulators and industry to together harness change and deliver on this mandate – to provide for our customers and deliver the regulatory changes we need to see the City thrive.
Chris Cummings is Chief Executive of the Investment Association