A group of high-profile institutional investors responsible for around £10trn (€13.8trn) in combined assets have written to the UK government with a concrete action plan to encourage long-term investment.
Alongside a plan unveiled today by the government to address competitiveness and productivity, a coalition of investors including Legal & General Investment Management, Newton Investment Management and Woodford Investment Management, have developed their own plan to support productivity with long-term capital.
In a letter to Chancellor of the Exchequer (Finance Minister) George Osborne (under the L&G letterhead) the group notes that while the UK has outperformed in job creation and GDP growth, productivity growth remains 16% below its pre-trend 2008 rate. The group says: “Long-term capital investment in the UK is too low, which contributes to low productivity and low workforce pay.”
The investors say they want to offer practical support and layout a four-pronged plan.
Firstly, the coalition propose to develop an action plan led by the Investment Association trade body to support long-term investment for productivity growth, building on the work of the Law Commission on Fiduciary Duties of Investment Intermediaries, the Stewardship Code and Professor Kay’s 2013 recommendations. It promises to report back to the government with an action plan by the end of the year.
The coalition also promises to communicate with investee companies on long-termism and develop practical solutions to support companies investing for growth and challenge those not via the Investor Forum. The letter says the investors will raise the issue directly with investee companies where they believe long-term investment is insufficient.The third part of the plan focuses on equity culture. The letter says that the investors’ collective influence as shareholders needs to be complemented by policy measures to support long-termism. It proposes an extended joint initiative, with government and representatives of UK industry, to extend and strengthen the UK’s equity base.
It says: “This would include support for your work to improve equity market access and IPOs, including through reform to the Listing Rules and the EU Prospectus Directive.”
Lastly, the group focuses on building long-term debt markets, noting that European debt capital markets currently lag the US in scale, flexibility and ease of access. The letter notes: “The EU Commission is already taking action on this issue as part of the Juncker Growth Plan and the Capital Markets Union being progressed by Lord Hill.”
The coalition says they will support their work with regular reports, the first being for the end of the year. The government has welcomed the group. Link to letter.
The investor signatories:
- Elizabeth Corley, Allianz Global Investors
- David Lis, Aviva Investors
- Simon Fraser, Chairman, Investor Forum
- Mark Zinkula, Legal & General Investment Management
- Helena Morrissey, Newton Investment Management & Chair Investment Association
- Peter Harrison, Schroders
- Mark Burgess, Columbia Threadneedle Investments
- Keith Skeoch, Standard Life Investments