abrdn Executives’ Perspectives on New Government’s Economic Policies and Market Implications

05/07/2024

UK Equities

Ben Ritchie, Head of Developed Market Equities, abrdn, says: “A landslide victory provides the sort of clarity and stability that equity markets need in an increasingly volatile world.

“Labour’s pro-growth agenda is key to delivering the tax revenues needed to fund public services, with private capital playing a vital role in supporting investment.

“If the new Government get this right, businesses with significant exposure to the UK economy should be the likely winners – a shot in the arm in particular for companies in the FTSE 250 and FTSE Small Cap.  With just a little more patience, investors could finally be rewarded.

“A key priority for the new Government should be to make UK equities more attractive for both domestic and international investors. 

“One of the quickest and most effective ways to deliver this is to scrap stamp duty on UK shares, making Britain more competitive, rewarding savers and attracting vitally needed inward investment.”

Private Markets

Nalaka De Silva, Head of Private Markets Solutions, abrdn, says: “Delivering growth to support public spending is a key priority for the new Government with planning reform expected to be a focus in the first 100 days in office.

We’re encouraged to see planning reform at the heart of policy priorities and hope this translates into swift, tangible reform and funding not only in the short term but with a long-term vision and stability.

“This is desperately needed to address the deep-rooted issues in the savings and pensions markets. By supporting the flow of capital into productive sectors, the UK’s comparative advantage can be maintained.

“In line with the productive finance initiatives, there is a role for directing more capital into domestic assets to support growth.

“We believe urban regeneration via large-scale real estate projects, specialist equity (growth equity and venture capital), social and economic infrastructure including renewable energy project assets have an important role in boosting the economy and providing investors with diversification.

“We’d like to see corporates and trustees empowered and incentivised to diversify pension asset allocation into a wider range of equities and alternative assets within an appropriate risk framework.

“Along with the investment management industry being encouraged by Government to develop products and vehicles to provide access to private markets to long term savers.

“During the first 100 days, we expect to see enablement for such allocations of capital via continued pensions reform which will allow for accrued benefits to be shared with corporate sponsors should schemes run on versus a move to insurance buyout.  

“We anticipate further movement on the cost disclosure issues in the Investment Trust Sector and we hope to see more incentives for long term savers.”  

Closed-Ended Funds

Christian Pittard, Head of Closed-Ended Funds and Managing Director, Corporate Finance, abrdn, says: “The new government must urgently look at fixing the cost disclosure rules which are holding back the UK’s closed-end fund sector.

“There’s nothing to lose and everything to gain, coming at zero cost to the public purse while boosting investor confidence and investment in the UK.

“Closed-end funds provide a critical source of capital for those large-scale real estate, specialist equity, infrastructure and renewable energy projects that, political consensus agrees, are needed to power the nation’s growth.

“Misleading and unhelpful rules on cost disclosure for investment trusts are choking investment into these productive areas and must be addressed immediately.

“It has impacted investor sentiment to the point where the disclosures could be adversely affecting investment decisions.

“Reforming UK capital markets can’t be done without solving this conundrum, given that the sector accounts for around 36 per cent of the FTSE 250, according to the London Stock Exchange.  

“At abrdn, we also believe capital markets reform should go further and encourage a national culture of saving and investing that would provide even more capital for growing our economic pie.

“Stamp duty on UK shares and UK domiciled investment trusts has distorted capital flows, putting the UK at a competitive disadvantage compared to international peers, further hampering economic growth.

“By cutting this unfair and distortive tax, the new government could make great strides in creating the healthy, competitive investment environment the country so badly needs.”

Pensions

Alastair Black, Head of Savings Policy at abrdn says: “We were delighted the Labour manifesto committed to undertaking a review of the pensions landscape recognising the importance of both delivering better pension outcomes as well as encouraging investment in the UK.

“The pension review provides a chance to take a step back and implement in a considered way taking on feedback from the industry.

“Current levels of contributions will not deliver adequate retirement outcomes for the majority. We have previously called for minimum auto-enrolment levels to substantially increase, and ideally doubled to 16%.

“Setting out a clear roadmap and timescales to increase towards this level will both help deliver adequate retirement outcomes to more people and boost the available amount of assets which could be invested into the UK.”

The latest stories