UK capital markets: a manifesto for growth

This short paper outlines a ‘manifesto’ for UK capital markets to drive investment, growth, and competitiveness. It that pulls together and updates key themes and policy proposals from more than 10 of our reports at New Financial over the past two years.

New Financial relies on support from the industry to fund its work. Our reports are available to New Financial member firms, government and regulators, and the media. If you would like to enquire about receiving a copy of the report, please click here

This manifesto combines high-level directional proposals to help shape the debate with more specific recommendations to deliver change, and is based around five core topics: reforming pensions, reforming capital markets, widening retail investment, rethinking the regulatory framework, and realigning the wider economy.

Here is a summary of the main recommendations:

• Reforming UK pensions: pushing ahead with radical consolidation in the different buckets of UK pensions to encourage investment in a wider range of productive assets and generate higher long-term returns; commit to a phased increase in pension contributions over a decade; incentivise, nudge, or (in some cases) mandate a shift in asset allocation by pension funds; encourage pension funds to focus more on value and net return than on ‘cost at all costs’; and start to transition the huge unfunded public sector pension schemes to a funded model.

  
  

• Reforming UK capital markets: push ahead with the unfinished business of the current reform agenda; better align the tax system to incentivise investment and remove specific taxes on UK investment (such as stamp duty); drag the UK framework into the 21st century with more digitisation; work more closely with our EU neighbours on common solutions to pan-European challenges; and focus on the different dynamics of the ‘international’ and ‘domestic’ roles of UK capital markets to deliver better policy and more impact.

  
  

• Widening retail participation: reset the balance between protection and participation, and remove structural barriers to wider retail investment; help create a wider sense of ownership and investment culture to encourage more people to invest; simplify ISAs in a way that keeps the vast majority of people using cash ISAs happy and opens the door to a big boost in investment in UK assets; drive engagement and participation through the wider use of digitisation; and launch a long-term programme of financial education combined with a concerted effort by the industry to make its products and services easier to understand.

  
  

• Rethinking the regulatory framework: resetting the culture of regulators to encourage a better balance between risk, growth, and protection; refocus regulators on enabling better market outcomes and measure their progress in part against those outcomes; increase resources and pay for regulators to focus on quality and experience; encourage politicians to provide more consistency and certainty, and create more formal structures for political scrutiny; and conduct a spring clean of overlapping remits and regulations.

  
  

• The wider economy: delivering on a more focused industrial strategy with a smaller number of priorities; delivering on planning reform and infrastructure investment; aligning the theory and reality of ‘Global Britain’ with the practical experience of many people when they come into contact with it; resetting the balance of regulation across the economy; and taking a digital first approach to government.