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Financial services

Mobilizing Capital for Growth: A Call to Action for the UK Economy

Strategic Insights

— 1 min read

As the UK economy prepares for the budget, a critical question must be asked: which sector can mobilize capital at scale to drive growth? Financial services, a crucial contributor to the UK economy, must be supported rather than taxed, to ensure continued economic growth and competitiveness. The sector's commitment to backing UK growth is evident, with initiatives like the Mansion House Accord and the Office for Investment concierge service.

Key Takeaways:

  • The financial services sector already contributes 12% of government tax receipts, making it a vital contributor to public services.
  • Proposals to introduce VAT on financial services or increase the bank levy could harm the sector's contribution and the UK's competitiveness.
  • Limited liability partnerships (LLPs) in the UK must not be taxed, as this could deter investment and harm the economy.
  • Nvidia's CEO, Jensen Huang, has praised the UK's potential as an AI superpower, but scale-up capital and an investment culture are needed to achieve this vision.
  • Currently, just 0.007% of British and Irish pension funds are invested in UK venture capital, compared to one dollar for every $200 in the US.
  • The Mansion House Accord aims to allocate 10% of pension fund assets into high-growth assets, with at least half directed into the UK economy.
  • The Office for Investment concierge service will streamline the investment process for foreign firms coming to the UK.
  • Abolishing stamp duty on share trading, especially for newly listed companies, could stimulate positive investment and remove friction in the investment process.
  • The financial services sector has increased its efforts to back UK growth, including the Mansion House Accord and the concierge service, and is now looking to the government to demonstrate its commitment to supporting the sector.

Statistics:

  • 12%: The proportion of government tax receipts contributed by the financial services sector[^1]
  • 0.007%: The proportion of British and Irish pension funds invested in UK venture capital[^2]
  • 1:200: The equivalent ratio in the US of pension fund investment in venture capital[^2]
  • PS280bn: The amount of money currently sitting idle in accounts earning zero interest[^3]
  • 10%: The target proportion of pension fund assets to be invested in high-growth assets, with at least half directed into the UK economy[^4]

Sources:

  • [^1] Alastair King, Lord Mayor of London
  • [^2] Alastair King, Lord Mayor of London
  • [^3] Alastair King, Lord Mayor of London
  • [^4] Mansion House Accord

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