In association with
Save content
Have you found this content useful? Use the button above to save it to your profile.
image of donkey being lured by carrot | accountingweb | Chancellor encourages UK investment
iStock_merrilyanne_donkey

Chancellor goes all out to encourage UK investment

by

Jeremy Hunt is keen for savers to invest in British businesses and in the Spring Budget he used both the carrot and the stick to encourage this.

11th Mar 2024
In association with
Save content
Have you found this content useful? Use the button above to save it to your profile.

Donkeys are usually slow-moving animals, although they can carry large burdens effectively over long distances. If you want your donkey to go faster, the two traditional approaches are either to dangle a carrot in front of its nose or apply a stick to its rear. You could try both at the same time, but this could leave the rider with no hands on the reins.

It has been clear since last year’s Mansion House Reforms that Chancellor Jeremy Hunt believes that getting the nation’s savers, and in particular those saving for retirement, to invest more in Britain’s up-and-coming young companies and industries is the key to his long-term plan to create a prosperous high-jobs/high-wage economy. And in the Spring Budget he has shown both the carrot and the stick by way of plans to achieve this.

Raft of measures

Among a raft of measures designed to help British companies, we saw £10m given to the Cambridge Biomedical Campus; a £2.5bn Back to Work Plan to help the long-term sick and disabled to fill vacancies in the labour market; £10bn a year to make full expensing permanent; faster planning, faster connection to the electricity grid, and £4.5bn of support for strategic high-growth manufacturing sectors. The stimuli are not only for large companies. The smallest firms will benefit from a rise in the VAT threshold from £85,000 to £90,000, and new finance from rolling the small or medium-sized enterprise (SME) recovery loan scheme into a new growth guarantee scheme.

Carrots like these should deliver lots of highly attractive investment opportunities for savers looking to back Britain through their ISAs and pensions. And if they do deliver, then perhaps we don’t need that stick. But relying on the “build it and they will come” philosophy has always been a risky approach, so the Chancellor is waving his stick at savers too.

Supporting UK investment

Next month, NS&I will launch a British Savings Bond, to be a three-year fixed-interest guaranteed savings account, the proceeds of which will support investment in the UK. We haven’t seen the rate yet and he is pitching into a sector that is both highly competitive and increasingly easy to access since investment platforms have started to list such bank and building society products on platform.

Last week a consultation begun on a new UK ISA, which will allow a further £5,000 a year to be sheltered inside an ISA on top of the current £20,000. The UK ISA looks as if it will be limited to equities of companies listed on UK stock markets and collective funds that invest exclusively in these, although the consultation does ask the question about whether it should allow corporate bonds and gilt holdings as well. We don’t have a launch timetable yet, as the consultation asks providers how long they will need to prepare.

I see this as part of the stick. The existing £20,000 ISA limit has been unchanged since 2017/18, so an uprating to £25,000 seems only natural. Except that if you do want to use the full £25,000 ISA allowance, you will be forced to put at least £5,000 into British companies.

Pension investments

Pensions have also had the Chancellor’s stick waved in their direction: workplace defined contribution (DC) schemes and local government pension schemes will have to publish the percentage of funds that they invest in UK companies. This figure (an average of 4%) is currently seen by the Chancellor as being much too low. They have been threatened with sanctions, as yet unspecified, if they don’t move in the right direction.

If things work as the Chancellor hopes, then there’s a bright future ahead for those who back British businesses through their savings and pension contributions.

Replies (4)

Please login or register to join the discussion.

avatar
By FactChecker
11th Mar 2024 12:56

Everything above is based on "If things work as the Chancellor hopes" ... so, based both on past performance and forecast lack of longevity, it's all just hot air.

"£10m given to the Cambridge Biomedical Campus" is a classic ... absolutely pointless in the scale of things (barely scratching an itch - once), and yet wasting public funds on private enterprise.
If the belief is there then fund a national Biomedical sector and invest in research & production, without feeding private investors.

And "a rise in the VAT threshold from £85,000 to £90,000" ... as others have said, too little to achieve any objective relating to registration or revenue collection.

"Next month, NS&I will launch a British Savings Bond .." ... so things I still hold (that, temporarily, were withdrawn from sale to new investors) are to be put back on the shelf - innovation at it's best.

The author mentions carrots and sticks as though they were distinct items ... but apparently not to the Chancellor who has combined them into those weird 'carrot sticks' you can buy in the supermarket - you know the ones that have been washed to look attractive, but actually had some of the nutrition removed and will wilt to an anaemic sludge within a few days!

Thanks (6)
paddle steamer
By DJKL
12th Mar 2024 12:36

The "Great British ISA "is as relevant as Jim Hacker's "Great British Banger"

What they seem to be suggesting is invest in UK listed shares irrespective of where they earn their profits, not sure what this really does for the UK except very marginally increase trading volumes re such equities, likely short lived as most will be buy /hold, but really it is effectively Mr Hunt offering investment advice to the "Great British Public."

Now I have nothing particularly against the Shells/Astras etc of this world, they serve a purpose, but it is A purpose not THE purpose, for some a valid investment choice for others not so much.

What is valid depends on aims/timetable etc.

So if I want a string of dividends to support me in retirement, without trimming holdings, higher yielding UK equities may be a fit (But no free lunch, if over distributing growth may suffer longer term), after all the UK index yield is higher than most, but if say looking for longer term growth with some income maybe US equities are a better fit. The fact is most people who have concentrated on UK listed equities to the exclusion of the ROW have ended up poorer than if they had thrown it at a world tracker. (Just look at FTSE 100 level over last 20 years) -of course past performance, but still, ignore tech, seriously!!!!!!!

So, the gullible will invest to get the extra sheltered investment, they may get the result they seek but somehow I doubt it, imho world investing is the way to go, some core worldwide holdings then others targeting specific markets, I hold a few UK focused ITS and UK listed shares, but hold a lot more that focus on the big wide world, because as far as I can see, the UK and Europe, being older economies, are staid, sluggish and likely ex significant growth.

Caveat emptor

Thanks (2)
paddle steamer
By DJKL
12th Mar 2024 12:44

If anyone can be bothered they really ought to look at what percentage of the FTSE100 market cap is made up by the ten largest UK listed entities and what percentage each earns of its profits within the UK marketplace.

These are NOT British business entities.

Shell
Astra
HSBC
Unilever
Rio
BP
Diageo
Glaxo
Relx
Glencore

Thanks (2)
avatar
By moneymanager
13th Mar 2024 10:08

Mongolia is just about, if it hasn't started, to become China's dominant source of COAL with its world largest known deposits, NO NET ZERO, it's an industrial suppressant con.

Thanks (0)