Starmer and Reeves told to put capital markets at heart of economic strategy
The new government must prioritise opening up the UK’s markets to new capital if the City is to act as an engine for economic growth, according to the chief executives of Aquis and PrimaryBid.
Speaking at the CityAM Summit in London on Wednesday, the two bosses said they were “optimistic” for the future of London’s capital markets under Keir Starmer and Rachel Reeves but that a lack of international and retail investment threatened to hold back growth.
Alasdair Haynes, founder and CEO of challenger stock exchange Aquis, suggested that UK assets could see more inflows from US investors as a result of Labour’s election victory.
“American investors want stability. This country has very cheap assets, and I am sure there are many American companies that want to invest in those cheap assets. They’re not going to do it until we get stability,” he said.
“So the good news is, the unstable government we had is out and we have a government that today talks the talk about stability, but the big question we have to ask ourselves is are they actually going to walk it.”
Haynes said that while certain tax benefits had made the UK “brilliant at start-up capital”, a widespread inability for mid-sized British firms to access scale-up funding in the UK created a “real, real issue” forcing them to look overseas.
“International capital isn’t going to come into the UK because there’s no stability,” he warned. “You are hitting your head against a brick wall. And that’s what needs to change.”
His comments come after a slew of UK firms have been tempted by deeper pools of capital in markets like New York, with British policymakers scrambling to draw up new rules on everything from pension fund investment to the listings regime.
Both bosses also stressed the importance of retail investment in bolstering the Britain’s capital markets, following nearly three years of heavy outflows from UK funds.
Anand Sambasivan, co-founder and CEO of retail investment patform PrimaryBid, told CityAM that he was “really encouraged” by the government’s engagement on its proposals for capital markets reform.
“If you look at all the best economies in the world, retail investors play a very big part,” he added.
“But if I look at the deliverables – we’ve talked about this, there’s the Hill Review, the Austin Review – there is a recognition that these still actually have to be delivered, and I’m excited for that to finally happen here.”
Latest data from the Investment Association shows April saw the biggest withdrawal by retail investors from UK funds since February 2023, pulling out £1.3bn for the 33rd straight month of outflows.
“We started PrimaryBid because retail investors were being left out of capital markets,” Sambasivan said. “From everything I’ve seen and heard from the government so far, and it’s early days, I’m very optimistic that we can actually deliver on our promise.”
Haynes noted cultural differences in retail investment between the US and UK and criticised policies that he argued gave scale-up firms even more reason to look for capital overseas.
“The [US] public get into public markets, and our public don’t go into public markets,” he said. “Things like the admissions document for scale-up businesses – you can’t invite the retail investors in. That’s wrong, fundamentally wrong.”
Haynes said the rules were “preventing people” from investing in “the best asset class”.
“And yet young people today all invest in cryptocurrency and all sorts of other things which personally I think is much riskier than investing in the future unicorns of this country,” he added.
“So if we can grow these unicorns, we can finance these unicorns, we can make these unicorns go public earlier, then we will get that growth that is so important and the tax receipts from that growth.”
A Treasury spokesperson told CityAM: “The financial services sector is central to the UK economy, and at the heart of this government’s growth mission.
“Reinvigorating our capital markets is a vital part of restoring economic growth, bringing innovative companies to our shores and supporting businesses to grow across the country.”