Business secretary Peter Kyle has warned UK pension funds that they must invest in British companies or face legal compulsion, expressing frustration at the lack of investment despite years of government initiatives.
Patriotic Duty Over Walled-Off Gardens
Speaking to the Guardian at an event at Lloyds Banking Group headquarters in London, Kyle said asset managers should feel a patriotic duty to make Britain a success. "They need to get off their high horses," he said, adding that he is "fed up" with the City asking for regulatory tweaks only to see no follow-through investment.
Kyle stated that mandation is not ideal but he will use it if necessary because he is "in a rush." He emphasised that pension funds represent British savers and should not sit aside from the economy in a "walled-off garden."
Government Push for Domestic Investment
Successive governments have tried to boost UK pension fund investment in the British economy. Chancellor Rachel Reeves and her predecessor Jeremy Hunt both pursued this goal. Reeves last year secured a new "Mansion House accord" with 17 of the UK's largest pension funds to voluntarily release up to £50bn of investments, with at least half earmarked for British assets including clean energy and startups.
Earlier this year, Reeves won a battle in the Lords to secure powers to mandate investment in UK assets. However, after fierce City lobbying and Tory opposition, the bill was watered down, leaving a back-stop power that cannot be used before 2028. The powers include a "saver's interest test" and will expire by 2032 if unused, or by 2035 if activated.
Criticism of Overseas Investment Patterns
Most pension providers already allocate funds to UK assets, but ministers have expressed frustration that big overseas investors—such as Canadian and Australian pension schemes—often invest more in UK infrastructure and private assets than domestic money managers.
Andy Haldane, president of the British Chambers of Commerce and former Bank of England chief economist, recently suggested that pension tax relief worth over £50bn should be offered only to savers willing to invest in Britain. He said radical measures are needed to provide capital for startup companies.
Transition of Power and Industrial Strategy
Kyle's comments come as Labour smooths City concerns about the transition from Keir Starmer to Andy Burnham, expected to become prime minister by 20 July. Kyle pledged that the government's industrial strategy would continue under Burnham, and he made a pitch to keep his job for stability. "I want to stay, I'll just stay where I am," he said.
In a speech marking the first year of the industrial strategy, Kyle said Britain needs "Manchesterism"—Burnham's plan for more devolution and state involvement—to boost the economy outside London and the south-east. He dismissed concerns that a change in leader could rattle business confidence, saying, "I'm concerned that it's a potential outcome. [But] I don't think it's the one that we are going to deliver."
