City could inject £225bn into the economy after regulation refresh, top firms claim
The City could inject an extra £225bn into the economy if regulators strip back red tape around financial services and unleash a wave of pension capital into the economy, a group of top firms have claimed.
A package of reform across the insurance, pensions and sustainable finance sectors could help the country dodge a “low-growth trap” and inject cash across the country, according to new analysis from Canada Corporation, alongside firms including Lloyd’s, Schroders and JP Morgan.
The group of firms has laid out five key objectives of reform today in a new report titled a “Vision for Economic Growth”, which include unlocking cash from the country’s pension funds and becoming a “digital first economy”.
“The UK’s productivity growth is low, GDP increases are sluggish, and wages aren’t keeping pace. The standard of living for many has been flat or declining and the prospects for the younger generation are uninspiring,” said Lord Mayor of London and former chair of pensions giant Phoenix Nicholas Lyons.
“But, given the right legislative and regulatory conditions, the financial and professional services sector can boost investment in our businesses and drive growth right across the country, financing our future.”
The calls come after Lyons won a commitment from several top pension firms earlier this year to divert a percentage of their cash into start-ups. Lyons has been lobbying the sector for a Future Growth Fund to channel more capital into small business.
Calls have been growing for ministers and regulators to push ahead with faster reform of the sector amid fears over the standing of London on the international stage.
Chancellor Jeremy Hunt announced a package of reform in December last year in what had been previously dubbed Big Bang 2.0.
However, top pension bosses today sounded the alarm on reform efforts and said stripping back rules must be done with “extreme caution”.
In its response to a consultation on how to get more defined benefit pension money invested in the economy, the Association of British Insurers said said the “central purpose of DB pension schemes – to pay the benefits promised to members – should not be undermined.”
“We welcome the focus on addressing some of the ongoing challenges in pension policy and are keen to work with Government to tackle these,” said Yvonne Braun, director of policy and long-term savings at the ABI.
“However, it should exercise extreme caution when exploring options for DB schemes, including the ability to extract surplus, and introducing a public consolidator. Introducing these market-shifting proposals may bring significant risks for highly uncertain rewards.”