UK's Boris Johnson and Rishi Sunak call for 'investment big bang' to boost economy

Open letter urges institutional investors to invest more in UK's long-term UK assets to bolster growth

Britain's Prime Minister Boris Johnson and Britain's Chancellor of the Exchequer Rishi Sunak visit the headquarters of Octopus Energy, in London, Britain October 5, 2020. Leon Neal/Pool via REUTERS

British Prime Minister Boris Johnson and Chancellor of the Exchequer Rishi Sunak issued a rallying cry to institutional investors to ignite an “investment big bang” to boost the country’s long-term growth.

In an open letter to the investment industry, Mr Johnson and Mr Sunak challenged the country’s top pension funds and institutional investors to consider investing a larger proportion of their capital in long-term UK assets that aim to boost a greener future, such as infrastructure projects.

The pair said British pensioners were at risk of missing out on "better retirements" because too small a proportion of their pension funds was being invested in long-term UK assets.

“It’s time we recognised the quality that other countries see in the UK, and back ourselves by investing more money into the companies and infrastructure that will drive growth and prosperity across our country,” the letter, co-signed by the Prime Minister and Chancellor, said.

“We want to see UK pension savers benefitting from the fruits of UK ingenuity and enterprise, being given the opportunity to back British success stories, and secure higher returns and better retirements.”

Britain's economy was hammered by the pandemic in 2020, suffering its biggest fall in output in more than 300 years last year, with a contraction of 9.8 per cent.

The country went on to make a swift recovery when restrictions were first eased in March, with the OECD recently raising its 2021 growth rate for the UK to 7.2 per cent, the fastest among large, developed economies.

However, Britain’s post-Covid recovery slowed sharply in July to its weakest level since March as supply-chain bottlenecks and rising worker absences caused by Covid-19 isolation rules hampered business activity.

The letter argued that global investors, including pension funds from Canada and Australia, are benefitting more from the opportunities that UK long-term investments afford, while British institutional investors are under-represented in owning such assets.

More than 80 per cent of UK pension fund investments were allocated to listed securities, which represent just 20 per cent of UK assets, the letter said.

While the ministerial pair recognised that choosing assets to invest in was up to the pension fund trustees and institutional investors themselves, they urged investors to allocate more capital to UK assets that required longer-duration investments.

The ministers said the government's Green Industrial Revolution and Innovation Strategy would support its bid to "build back better", but that an "investment big bang" was required to fuel the UK's recovery.

"The United Kingdom's economy possesses a rich pool of assets ripe for long-term investment and bolstered by a world-leading research sector, commitment to the green technologies of the future, and British entrepreneurial spirit," the letter said.

Updated: August 4th 2021, 9:30 PM