21 November 2024

Having written a Mansion House speech – effectively an exercise in trying to maintain some semblance of narrative cohesion while shoehorning over 20 policy announcements into an after-dinner speech – I have a lot of sympathy for the Chancellor’s team. However, if we were to extract themes from a speech so long it required teleprompters, they were:

• the Chancellor’s efforts to boost private investment in UK Plc and guarantees of sufficient regulatory predictability, and
• consistency to allow growth sectors to develop new products and services.

Going for growth

LGPS, and to a lesser extent, multiemployer DC scheme consolidation were the most heavily trailed announcements. The Chancellor noted that consolidating LGPS schemes into eight megafunds and setting minimum AUM levels for multiemployer DC schemes “could unlock around £80bn for investment in private equity, including exciting growth businesses and in vital infrastructure projects including transport, energy and housing projects here in the UK”.

Without mandation, however, the word “could”, could well be doing a lot of heavy lifting. LGPS funds will be asked to set investment targets for regional investment, but the primacy of the fiduciary duty remains. HM Treasury will hope that planning reforms will address the availability of local investable opportunities, but in the interim, like we saw at the International Investment Summit, the Chancellor announced public-private partnerships to deliver additional private investment over the course of this Parliament. Aegon UK and NatWest Cushon will work with the British Business Bank (BBB) to invest in UK growth companies, while Phoenix and the BBB will deliver a £500 million investment vehicle in UK science and technology.

Certainty for competitiveness

On providing certainty for key growth sectors to innovate, the long-promised commitment to issue a digital gilt via blockchain (DIGIT – because HMT, the FCA and FS SLTs love an acronym) acted as a vote of confidence in the potential of tokenisation. The National Payments Vision at the very least acknowledges the significance of the sector and the announcement of the Transition Finance Council (in partnership with the City of London Corporation), alongside a range of green finance consultations served as a statement of intent for a strategically significant market.

The launch of a call for evidence on an FS industrial strategy, naturally entitled the FS Growth and Competitiveness Strategy, is also intended to establish the Government’s approach to the sector for the next 10 years, focusing on fintech, sustainable finance, insurance and reinsurance, capital markets and asset management and wholesale services.

While long-term predictability is certainly welcome, to (poorly) paraphrase Mike Tyson, “Everyone’s got a plan till they get hit by new tech”; if this call for evidence was opened 10 years ago there’d be a lot of excitement about robo advice, as opposed to tokenisation and transition finance. As such, government will also need to signal to industry a willingness to pivot, reprioritise and co-create to gain the advantage on strategically significant innovations.

Reshaping redress

On predictability, a call for input on “modernising the redress system”, i.e. reshaping the relationship between the Financial Conduct Authority and the Financial Ombudsman Service, may provide a lot more certainty of the retail sector on consumer redress. Like her predecessor, the Chancellor may well have discovered that the Ombudsman’s independence, coupled with its ability to set precedent through its final decisions gives it a lot of influence over key sectors of the economy (like the motor industry).

In adjudicating on complaints against firms, FOS considers any applicable laws, regulation, industry codes and good practice. However, if the law and FCA rules are not sufficient to make a judgement, the Ombudsman will determine what constitutes a “fair and reasonable outcome”. The call for input could change that relationship, to allow the FCA to provide greater clarity on the potential scale of harm in mass redress cases among other measures.

There were also announcements intended to help mobilise retail capital to UK equities and productive assets, double the size of the mutuals sector and fire a shot across the bow of big tech.

Want to know more? Email dave.eaton@h-advisors.global.