UK needs capital market reform to attract £1 trillion in investment, says Wilson report
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The UK needs to reform its capital markets to attract £1 trillion of investment over the next decade to fund housing, infrastructure and start-ups, according to a long-awaited report by City leader Sir Nigel Wilson.
“The UK economy and its capital markets have lagged behind the US since the global financial crisis,” his report published on Friday said.
The report by Wilson, chairman of Canary Wharf Group, will be unveiled at a high-level meeting of chief executives, investors and government ministers at the headquarters of the London Stock Exchange, where senior figures in the financial industry will make a call for continued efforts to reform the UK’s troubled capital markets.
The UK is suffering from weak economic growth, unusual political instability and investment outflows from publicly listed companies — but Wilson dismissed any suggestion that the country is stuck in a “vicious cycle”.
However, the former Legal & General chief executive said significant action was needed, including in areas such as tax and regulation, as he called on ministers to push ahead with moves to encourage UK investors and pension funds to buy into domestic assets.
“Some changes will require domestic bias and we have no shame or remorse about that,” Wilson told the Financial Times, arguing that other countries such as France, Sweden, Australia and the United States use their tax and pension systems to promote domestic investment.
This week the government launched a call for evidence as part of its review of the pensions sector.
Options identified by Wilson include using pension tax breaks to encourage investment in UK companies and reducing the stamp duty on share trading, which generated £3.8bn in tax revenue last year.
“The UK currently taxes its retail investors with [stamp duty reserve tax] when buying UK-listed Aston Martin shares, but not when buying German-listed Porsche shares or US-listed Tesla shares,” the report noted.
Another option identified by Wilson — a “UK Isa” to funnel people’s savings into London-listed stocks — is being has been removed of the new Labour government, the FT reported this week.
Wilson also argued that the UK market needed to adopt a more “risk-on” mindset after following an “extremely risk-averse” path since the 2008 financial crisis.
He said £100bn of new capital was needed annually over the next decade to fund a “rebuilding phase” that could support annual economic growth of 3%.
This includes annual investment of £20-30bn to build 300,000 homes a year, £20bn in offshore wind and solar, £8bn in water infrastructure, £15bn in growing technology and life sciences businesses, and up to £8bn in electric vehicle rollout.
Wilson said low investment in the UK compared to other G7 economies had had a “negative cumulative effect over a long period”.
“We are trying to become like Manchester City,” he added, citing the football club’s rise from mediocrity to success thanks to years of heavy investment in improving its squad.
The “Capital Markets of the Future” report was commissioned by the Capital Markets Sector Taskforce, a group of leaders chaired by stock exchange chief executive Julia Hoggett, and pushing for changes to City rules to boost UK markets.
Much of the group’s work has focused on reviving the UK’s public markets, but Wilson has highlighted the importance of venture capital, private equity and debt markets. Some City executives believe the reform agenda has focused too much on the public markets.
Wilson said he expects most of the UK’s top 20 financial services startups — such as Revolut and Monzo — to list in the UK within five years. Part of the mission is to close the gap in governance and disclosure requirements for public and private companies to make listings more attractive.
“They’re all still private because we haven’t made them interesting enough to move into the public domain,” Wilson said.
