UK announces plans to ensure billions of pounds worth of pension funds are invested in early-stage companies to boost economic growth amid criticism that the UK is becoming an unattractive place for technology bottom.
UK Chancellor of the Exchequer Jeremy Hunt said in a speech late Monday that he would increase pensioners’ returns by 1,000 a year by enabling them to earn long-term returns from investing in privately held start-ups. He outlined a number of reforms he said would boost the pound ($1,283).
Among the measures introduced by the government was an agreement among the country’s largest defined contribution pension providers to allocate 5% of default fund assets to unlisted stocks by 2030.
If all other defined contribution plans follow suit, this could allow for up to £50 billion (about $64 billion) to be invested in high-growth companies, Hunt said.
Meanwhile, defined contribution schemes that work to invest more effectively could raise the pension pot for average earners by up to 12%, to as much as £16,000, he added.
The UK has Europe’s largest pension market, worth over £2.5 trillion.
“We want to bring together the skills of financiers, entrepreneurs and scientists to embrace new technologies such as AI and become the world’s next Silicon Valley and science powerhouse. According to the prepared remarks he shared, Hunt was scheduled to say in his speech at Mansion House.
“This is the traditionally very agile and agile financial services sector to ensure that it has the right architecture to provide the highest degree of security for investors and to provide capital to companies and to do so. It means having the best talent here in the UK.”
Hunt also helped create an “intermittent trading platform” that allowed public-market investors to trade shares in private companies. It will act as a waypoint for private companies looking for alternative financing avenues to go public.
UK technology track record under fire
It comes after criticism from prominent tech industry voices that the UK is becoming a less attractive place to do business for tech companies.
microsoft Brad Smith said confidence in British technology had “been severely shaken” after regulators blocked the company’s takeover of video game publisher Activision Blizzard. Meanwhile, Nikolai Stronsky, CEO of fintech firm Revolt, said it would “never go public” in London, citing unfavorable taxation and bureaucratic regulations.
Separately, after much lobbying from UK authorities, chip designer Arm has opted to list in the US instead of the UK. This was a major blow to the country’s ambitions to become a global destination for IPOs of big tech companies.
“From a personal perspective, the potential benefits for UK tech companies are very clear,” Will Wynn, co-founder of online workplace pension platform Smart, told CNBC. “We see this as an opportunity for others to gain support for similar success.”