The post-pandemic recovery: why equity investment must be part of the solution

In a joint letter published today, Boris Johnson and Rishi Sunak have called on Britain’s asset managers to back the UK’s long-term potential as part of an “investment big bang” to boost growth.

BGF’s executive chairman, Stephen Welton, provides his thoughts on the implications for growth economy businesses in the UK:

“We welcome today’s announcement from the Prime Minister and Chancellor to supercharge investment as part of the post-Covid economic priority to build back better. Given the challenging economic and operating environment for UK businesses, together with the increasing focus on innovation, we urgently need to expand the sum of private capital available for equity investment in scaleup companies so we help them to realise their potential.

“BGF has long called for the removal of the regulatory barriers that prevent or disincentivise UK institutional investors – such as defined contribution (DC) pension schemes and insurers – from backing unlisted equities. The current lack of investment speaks for itself. Today’s announcement is a step in the right direction. We need to add more flexibility around DC pension funds’ charge cap – by excluding performance fees from this cap for relevant growth equity and venture capital investments – to enable these entities to invest in important assets that have for too long been off limits. This will not only benefit the scheme members who are currently missing out, but also the scaleup companies in need of investment, and in turn the wider economy that depends on such companies to power its growth, in key priority sectors such as clean growth.

“There remains an urgent need for much greater growth capital to support entrepreneurs and innovators, to deliver on the ambition to turn Britain into  a science superpower, and today’s news will form part of a comprehensive and critical fully funded plan to drive nationwide investment – key to ensuring businesses not just survive but thrive. The UK has an abundance of dynamic, innovative, well-run businesses, with the potential to grow and become national and international champions. They simply need greater long term funding to help them get there, and that’s why an investment big bang is needed to catalyse real action. As we prepare to reopen the economy and society, now is the time to unlock the immense potential of the many brilliant UK businesses up and down the country that will fuel the recovery in the long run. We have the institutional capital in the UK, we just need to mobilise it, whilst we are adding to that with key strategic international partners such as the UAE. We are at an inflexion point when we can and should make a major difference”