During his Mansion House speech on 10 July 2023, Chancellor Jeremy Hunt set out his ‘Mansion House Reforms’, a substantial package of measures aimed at enabling the financial services sector to increase pension and other investment returns for people across the UK and boost the supply of investment capital available to support the growth of high potential businesses across the UK economy.
The Mansion House Reforms are ambitious, pragmatic and necessary and will underpin the UK industry’s competitiveness and its contribution to supporting economic growth and resilience. Most importantly, the main beneficiaries will be the British people, who will gain from greater investment in the UK economy, revitalising communities and improving pension investment returns.
The Chancellor underlined the significant contribution made by financial and related professional services to the UK economy and public finances. The Chancellor reflected TheCityUK messaging and data to underline the significant contribution our industry makes to the economy and public finances. He noted that the industry employs nearly 2.5 million people, and that while two thirds of those are outside the south-east, London is the world’s second largest financial centre and one of the most dynamic cities on the planet. He also stressed that the industry generates more than £100 billion in tax revenue, paying for half the cost of running the NHS.
The Chancellor set out the government’s ambition to make the UK a ‘science superpower’. He recognised the important enabling role of financial services in achieving this, and that the industry needs the right architecture and the best talent to provide the best possible security for investors, as well as capital for businesses.
The Chancellor wants to ensure the UK remains an attractive world-class listing location. He recognised the excellent work of the Investment Research Review, led by Rachel Kent of Hogan Lovells, and confirmed that the government accepted all of its recommendations. He also announced a global first for the UK, pledging to establish a pioneering new ‘intermittent trading venue’ before the end of 2024, that will allow private companies access to capital before they publicly list. He also pointed to the publication of draft legislation on prospectus reform – a milestone of Lord Hill’s UK Listing Review – giving companies more flexibility to raise even larger sums from investors, and more quickly.
Pensions were another key area of focus, with the Chancellor announcing plans to unlock investment in high-growth companies and boost the UK’s capital markets. One of his major announcements was the ‘Mansion House Compact’, championed by the Lord Mayor. Nine of the UK’s largest Defined Contribution (DC) pension providers have already signed the voluntary Compact, committing to the objective of allocating at least 5% of their default funds to unlisted equities by 2030. He also set out a raft of other initiatives in this space, including:
- Facilitating a programme of pension scheme consolidation.
- Testing options to open investment opportunities in high-growth companies to pension funds, as a way of crowding in more investment.
- Introducing a permanent superfund regulatory regime to provide sponsoring employers and trustees with a new way of managing Defined Benefit (DB) liabilities.
- A call for evidence on the role of the Pension Protection Fund (PPF) and the part DB schemes play in productive investment.
- A joint Department for Work and Pensions (DWP) and HM Treasury (HMT) call for evidence to explore how to improve understanding of pension trustees’ fiduciary duty, overcome barriers and ensure a focus on good saver outcomes.
- Local Government Pension Schemes (LGPS) consultations on:
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- Accelerating consolidation of LGPS assets, with a March 2025 deadline for all LGPS funds to transfer their assets into local government pension pools and ensure greater transparency on investments.
- Barriers to achieving better investment returns, setting a direction that each asset pool should exceed £50 billion of assets.
- Doubling LGPS allocations in private equity to 10%.
The Chancellor referenced the recent passing into law of the Financial Services and Markets Act – something on which TheCityUK has been heavily engaged in influencing throughout its development and passage through Parliament.
The Chancellor referenced implementation of the Smarter Regulatory Framework for financial services, announcing that government is now commencing repeal of almost 100 pieces of unnecessary retained EU law, further simplifying our rulebook whilst retaining our high regulatory standards.
Through the International Regulatory Strategy Group (IRSG) – our joint venture with the City of London Corporation – TheCityUK has been very much engaged in influencing the government’s approach to this important package of reforms and will continue to work with HMT, regulators and partners to ensure a smooth transition.