Leading the Pack
Staying internationally competitive is core to the future success of UK investment management, and to retaining the boost that the industry currently gives to the wider economy.
In total, UK investment managers look after £8.5 trillion. This makes the UK the second largest investment centre in the world, second only to the US in scale, and bigger than the next three centres in Europe (France, Germany and Switzerland) combined. Over a third of the total assets under management in the UK – £3.6 trillion – is managed on behalf of savers from outside the UK.
The UK has many natural advantages which have helped us to build this position, among them our legal system, time zone, and the English language. But the right regulatory system, skills and outlook is needed to transform this into true competitiveness. This brings immense benefits to communities all across the UK. The scale and success of the industry contributes directly to the economy: it is responsible for 4% of the UK’s exports in services and contributes £4.5 billion in tax each year.
There are many indirect benefits, too. Having a world leading investment sector right here in the UK makes it easier for British savers to access the very best products and expertise. Overall, three quarters of UK households use the services of an investment manager to help them to invest their savings and, in particular, to plan for their later life. It also means that investment decisions are made close to the UK businesses and infrastructure projects which rely on the capital channelled into them by investment managers. In total, IA members have invested over £1.6 trillion in the UK economy through shares, bonds, property and infrastructure.
This is precisely the moment that the UK’s strength in investment management should be reinforced. Our recovery from the pandemic means that the jobs, tax revenue and export earnings that the industry provides are needed more than ever. It also means that businesses across the economy have needed fresh capital to weather the storm and to reshape their activity for the new world: since lockdown began, investment managers have channelled tens of billions into the UK to help businesses to ride out the storm and to reshape themselves for the new world. Investment managers are most often thought of as investing in FTSE companies, but they also provide capital to small companies and private businesses all around the UK.
But this position is not automatic, and other leading centres (notably Shanghai, Hong Kong and Singapore) are beginning to challenge.
If the UK does not stay innovative and welcoming to international business, this status risks being lost. Now is therefore the right time to cement the UK’s position, making sure that we are more attractive not only than the traditional financial centres in Europe and North America, but also than newer locations which might be perceived as more dynamic: today we are competing globally, not just against established markets.
The Investment Association has put together a plan, Leading the Pack, on the steps Government can take to put the industry in the perfect position to take advantage of the opportunities on offer. We look forward to working with them on it.