Budget 2024: Industry welcomes boost for UK investment

In her speech to parliament yesterday (30 October), chancellor Rachel Reeves announced wide-ranging spending plans on public services, aided by a change to fiscal rules that have enabled more borrowing.

She also highlighted the role of pension fund investment, focusing on the creation of the National Wealth Fund and the British Growth Partnership, which will allocate to infrastructure and growth capital respectively.

The National Wealth Fund aims to catalyse £70bn of investment capital into core areas. The chancellor said it would focus on investment in ports, train line electrification, the aerospace industry and the automotive sector, especially electric vehicles.

Meanwhile, the Budget document stated: “It is critical to the growth mission that our most innovative companies are supported to start, scale, and grow in the UK...

“Through the establishment of the British Growth Partnership and the undertaking of the Pensions Review, the government is seeking to encourage more investment from pension funds into UK growth assets.”

GLIL Infrastructure managing director Ted Frith said that “any announcement that supports investment in the UK, particularly core infrastructure, is to be celebrated”.

However, Frith emphasised that the amount of money available was not the main issue affecting UK investment – it was the opportunities on offer.

“We’ve long said that securing capital is not necessarily the key piece of the puzzle,” he explained. “Speaking from a pension fund’s perspective, appetite to invest in the UK is not the problem, it’s the availability of suitable projects that often holds investors back.

“The chancellor’s commitment to improve infrastructure delivery suggests this government understands that and is starting to provide policy clarity to support the rhetoric. Alongside the ongoing overhaul of the planning system, this could remove some of the hurdles to UK investment.”

Catalysing the right opportunities

Financial services giant Phoenix Group has invested substantially in new UK-centric vehicles, in particular through its partnership with Schroders.

CEO Andy Briggs said: “The way government invests alongside the private sector will be critical to boosting growth in the UK. The changes to the fiscal rules make economic sense if implemented in the right way.

“As a committed domestic investor, we hope these changes will ensure our capital works better alongside the government, and helps catalyse investments in the social and economic infrastructure the country needs.”

Michael Moore, chief executive of the British Private Equity and Venture Capital Association (BVCA), said: “It is welcome that the government has listened to our arguments on the value of the private capital industry and how important this sector is to the economy.

“We recognise that the government has had to balance the need to raise revenue for essential public services with the requirement to keep our economy competitive...

“Our industry will work with the government as it consults on implementing these changes and ensures any risks of reducing investment are mitigated.”

Calum Cooper, head of pensions policy innovation at Hymans Robertson, said it was “great to see no detrimental change in tax relief on UK investments”, but argued that it may have been a “missed opportunity” to reverse the trend away from domestic investment.

However, the decision to bring pensions into the scope of inheritance tax could encourage pensioners to spend more during retirement, Cooper said, bringing a potential boost to economic growth.

Social and sustainable investment

The Budget document stated that the government would also develop a dedicated social impact investment vehicle, designed to “mobilise private investment to deliver positive social impacts”.

The design of this vehicle will be consulted on during the second phase of the government’s spending review.

Nigel Aston, market development lead for defined contribution solutions at Aon, said: “Central to the chancellor’s vision of investing for British growth is the desire to make it the right sort of growth, with a strong emphasis on green infrastructure and technology.

“This should mean that there may be even more emerging opportunities for UK pension plans to invest in areas that not only promise attractive returns, but also improve the landscape into which members will retire in the future.

“This, together with the ongoing review of productive finance in pensions, hints at a wider and potentially better investment universe developing.”

Insurers and asset managers react

The Association of British Insurers’ director general Hannah Gurga said: “Insurers and long-term savings providers play a crucial role as investors in boosting the economy, so the government’s focus on stability, predictability and investment is welcome.

“We look forward to working with the government on the National Wealth Fund and the Pensions Review to further unlock the power of private investment, especially with a focus on green and good UK infrastructure projects.”

Gurga added that the association would work with insurance companies and decision makers at a local and regional level to “identify and help fund suitable projects across the country, delivering the best value for savers, the economy and the environment”.

Chris Cummings, chief executive of the Investment Association, the trade body for asset managers, said the government’s industrial strategy and corporate tax plan were “a welcome starting point” to bringing more investment into the UK.

He added: “This is the beginning of the journey and more will be needed to build domestic and international confidence to drive strong UK capital markets and reinvigorate economic growth in partnership.”

Further reading

Budget 2024: ‘Devil is in the detail’ of tax change implications (30 October 2024)

Budget 2024: National insurance hike ‘terrible news’ for pension adequacy efforts (30 October 2024)

Budget 2024: Bond managers downplay gilt market volatility (31 October 2024)