Speech by the Economic Secretary to the Treasury, Sajid Javid MP, on investment management strategy
Speech by the Economic Secretary to the Treasury. To be read in conjunction with the Financial Secretary to the Treasury's speech on investment management strategy.
I should start by apologising for our having to change the timing of this event at such short notice.
There is a very important vote in the House this evening that Greg and I can’t miss.
I ‘m very glad to be able to talk to people from the investment management industry today;
Because one thing that government ministers – quite rightly – face on a daily basis, is people calling on us to fight for British jobs and to fight for British industry;
And this industry – investment management – is one in which we can rightly claim to be among the world leaders.
It is an industry that provides employment in the UK, that provides investment in the UK and – crucially – helps generate growth for the UK.
I know that your industry and your jobs aren’t always the easiest to explain to people.
Greg and I want to use our time with you this evening to say three things.
Firstly, we want to tell you that we understand the work you do, and the important function fulfilled by your industry.
Secondly, we want to tell you that we recognise the vital role your industry plays in the British economy and in the British jobs market.
And thirdly – and most importantly – we want to lay out the changes we are making that will help to keep your industry strong; through taxation, through regulation, and through marketing;
Changes that will maintain the UK’s position as the most competitive location for funds.
The importance of the UK AM industry
[So] As I say, we recognise that investment management – or IM – is one of the UK’s most successful industries:
- the industry manages around £5 trillion of funds and earns an estimated £12 billion a year for the UK – which represents around 1 per cent of the UK economy
- it is a key source of liquidity, accounting for over a third of all investment in UK equities
- and it is critical to the financial future of millions of savers and investors. In 2011, 89 per cent of UK assets under management were accounted for by institutional clients such as insurers and pension funds.
But while this city continues to be the UK’s leading IM centre, you’ll all be well aware that the industry is a strong component of regional economies too.
Yesterday I visited Edinburgh, which is also a very strong centre for investment management;
And organisations based in Scotland as a whole manage approximately 12 per cent of all assets under management in the UK. An amount roughly equivalent to a third of UK GDP.
The reasons that Edinburgh, London and the rest of the UK can compete so well in this field are very clear:
London is the world’s leading financial centre, with a deep talent pool in wider financial, legal and professional services.
- the UK has natural strengths in language, geography, and law
- we are very well connected to other financial hubs
- our government is prepared to defend industry interests in international forums like the G20, the Financial Stability Board, and Europe
- and we have a strong and independent regulator that gives consumers confidence
It’s no surprise then, that investment management is such a significant employer. 32, 000 people directly, not to mention all the indirect jobs.
But what we mustn’t do is grow complacent, and think that because we’re in a strong position now, that this will continue to be the case five, ten or fifteen years down the line.
While we remain Europe’s leading centre for fund management, we recognise that our share of fund domicile has fallen in the last decade.
So we will do what we can – as government – to help reverse this trend and enhance our dominance in fund management.
In short, our mission is to make the UK the most competitive location for funds.
We want funds domiciled here. And we want funds managed here.
Over the last couple of years, you’ve made very clear to us the threats of competition from overseas – whether that be from Ireland or Luxembourg or further afield;
And you’ve also made very clear to us that if the UK can maintain its position as a world leader, then we have a real opportunity to see the industry grow on our very shores.
Timing
So we believe that this is exactly the right time to act to support your industry:
- demographic changes are giving your sector an opportunity to grow. As emerging economies generate improvements in incomes and living standards, a growing global middle class will live longer than any previous generation and will invest accordingly
- Asia and China are increasingly looking at opportunities to invest via European products and domiciles
- and the introduction of the Alternative Investment Fund Managers Directive (AIFMD) this summer means that a number of offshore funds will be moving onshore into Europe, and we want to act now to make sure the UK is in a strong position to secure these funds
Conclusion
So we recognise the importance of your sector.
We believe this is the right time to take action and support the work you do.
And Greg will now talk you through the form that action will be taking.
Thank you.
Please see the Financial Secretary to the Treasury’s speech on investment management strategy to read on.