Key facts
- Business Secretary Peter Kyle has warned UK pension funds to increase investment in British companies.
- He threatened to use legal mandates if voluntary investment levels do not improve.
- Kyle cited a "patriotic duty" for asset managers to support the UK economy.
- Previous government efforts, including a "Mansion House accord," aimed to boost domestic investment.
- Current legislation allows for mandatory investment powers, but they cannot be used before 2028.
UK Business Secretary Peter Kyle has issued a stern warning to the nation's pension funds, urging them to increase their investments in British companies or face legal compulsion. Kyle expressed significant frustration with the current level of domestic investment, despite years of government initiatives and reforms aimed at encouraging such capital allocation.
Speaking at an event in London, Kyle stated that he was "fed up" with the City of London's requests for regulatory tweaks that did not translate into actual investment in the UK economy. He emphasized that asset managers, who handle the savings of British citizens, have a "patriotic duty" to contribute to the nation's success rather than operating in isolation. He indicated a willingness to use mandatory powers if necessary, stating, "I’ll use it if I have to, because I’m in a rush."
Successive governments have attempted to steer pension funds towards domestic assets. Last year, Chancellor Rachel Reeves secured a voluntary "Mansion House accord" with major pension funds to release up to £50 billion, with at least half designated for UK assets, including clean energy and startups. However, legislation that would have granted ministers powers to mandate investment faced significant lobbying and opposition, resulting in a watered-down bill. The current back-stop power cannot be utilized before 2028 and will expire if not used by 2032 or 2035.
Ministers have observed that large overseas investors, such as Canadian and Australian pension schemes, often allocate substantial capital to UK infrastructure and private assets compared to their domestic counterparts. Former Bank of England chief economist Andy Haldane has previously suggested radical measures, including linking pension tax relief to domestic investment commitments, to provide necessary capital for startup companies.
Kyle's remarks come as the Labour party seeks to reassure the City of London about a potential transition in leadership. He pledged that the government's industrial strategy would remain a priority and expressed a desire to continue in his role to ensure stability. He also promoted "Manchesterism," a concept associated with Andy Burnham, advocating for greater devolution and state involvement to stimulate economic growth outside of London and the South East.