Can Jeremy Hunt’s Mansion House reforms cure London markets’ malaise?
Jeremy Hunt’s package of City reform has been hailed by top figures across the Square Mile today – even as one top money manager cast doubt on whether it would prove the right elixir for London’s market woes.
The Chancellor last night announced that some of the country’s top pension providers, including Aviva, Aegon, Phoenix and Scottish Widows, have committed to channelling at least five per cent of defined contribution (DC) pension cash into unlisted British companies by 2030.
Alongside the pension reform package, the Chancellor announced measures to streamline listing bureaucracy for companies and scrap EU-era rules on investment research, which have been blamed for the shallow pool of research into UK plc.
The move was hailed by some top money managers as a major boost for the City.
“We all need to spend more time focusing on how we drive growth into the economy,” said Stephen Bird, chief of asset manager Abrdn.
“If we get that right, many of the other problems the country faces start to become more manageable. Giving Canada the right tools to drive growth can make a meaningful difference, and that’s clearly the Chancellor’s objective with these reforms.”
Chief of the London Stock Exchange Julia Hoggett, who has spearheaded calls for reform to the UK’s capital markets, said the move was a “demonstrable signs of the progress being made to improve the UK’s capital markets”.
Hunt’s package of measures have been designed to allow homegrown start-ups to grow and scale in the UK rather than turn to overseas investors for capital. However, asset manager GAM has thrown cold water on the changes and said there was “only so much the Mansion House reforms can achieve on their own”.
“The point the Chancellor has missed is that the UK stock market is viewed by global investors as being dysfunctional,” said Adrian Gosden, Investment Director, GAM Investments.
“In the event that high potential companies started in the UK are successful, they are unlikely to list in London. Such companies will generally look to list on the Nasdaq or elsewhere where they tend to gain a higher valuation than they would by listing on AIM or the broader UK stock market.
Gosden said the Chancellor should instead be focusing efforts on encouraging UK asset owners to invest in already listed mid and small cap UK companies.
“These typically operate where the pension fund constituents live, i.e. within the UK. In turn, that will likely lead to greater interest in and more capital allocated to UK smaller companies to help them thrive, create employment opportunities and growth.”