On 14 November 2024, Chancellor Rachel Reeves delivered her inaugural Mansion House 2024 speech, announcing a collection of reforms designed to drive growth and competitiveness in the financial services sector.
The Chancellor emphasised that 'the UK has been regulating for risk, but not regulating for growth'. Instead, she wants the sector to 'innovate, grow, and seize the opportunities for investment in businesses, infrastructure, and clean energy across Britain'.
Whilst details are to follow in many policy areas, the announcements provide a helpful sense of direction for the industry and highlight the government's commitment to growth, enhancing the UK's competitiveness, and creating a more flexible regulatory environment.
The table below sets out some of the key points from the Mansion House speech which we think will be of the most interest to those working in private investment funds.
| Theme | Key proposals | Comment |
|---|---|---|
| 'Bold reforms' to the UK pension system to better facilitate pension fund investment (set out in the Pensions Investment Review's interim report and government consultations published on 14 November and open for comment until 16 January 2025) | The proposals will advance several measures
already in train, as set out in the previous government's
Mansion House agenda (and announced in the July 2024 King's
Speech). The principal measures are threefold:
|
This is a flagship area of the proposals and
brings impetus to ongoing initiatives in this area. They build on
other developments designed to help drive DC investment in private
capital and accelerate interest in the Long Term Asset Fund in
particular (as covered in our recent Horizon Scan). On optimising LGPS pooling for the future, the consultation proposes minimum standards: (i) administering authorities (AAs) set the investment strategy for their fund but must delegate its implementation to the pool and take principal advice from the pool; (ii) pools must be established as FCA-authorised investment management companies; (iii) AAs transfer legacy assets to the management of the pool; and (iv) pools are required to develop the capability to conduct due diligence on local investments and manage these investments effectively. The government notes that as of 31 March 2024, only £178 billion (45%) of LGPS assets (split across 86 AAs) was invested through the eight established 'megapools'. This means that a significant proportion are missing the opportunity to benefit from the lower fees, enhanced investment opportunities, and improved efficiency and resilience that pooling can bring. |
| 'A world-leading sustainable finance regulatory regime' | This area includes a series of proposals and two
published consultations:
|
The government seeks to establish whether a UK
taxonomy (a classification tool which provides users with a common
framework to define which economic activities support climate,
environmental, or wider sustainability objectives) would be
additional and complementary to existing policies in meeting its
objectives of mitigating greenwashing and channelling capital in
support of its sustainability objectives. This will be of interest,
given the EU taxonomy is expected to become more embedded in the
EU's sustainable finance legislation, and the possibility of a
sister regime in the UK has been on the agenda for some time. International interoperability, business safeguard principles, and governance and oversight are some of the key design considerations the government is seeking input on. In particular, market participants are asked to help with any lessons learnt from taxonomy implementation in other jurisdictions. |
| Reform and replacement of the current Senior Managers and Certification Regime | The aim is a more proportionate approach that 'reduces costs so that businesses are freed up to focus on growth' | This shows a change in tone, in that the government had not previously suggested a major overhaul of this regime (see our recent Horizon Scan for more on this). |
| A Financial Services Growth and Competitiveness Strategy (due to be published in spring 2025, alongside the industrial strategy and other sector plans) | This is a call for evidence (open for feedback until 12 December 2024) outlining five priority growth opportunities: fintech, sustainable finance, capital markets (including retail investment), insurance and reinsurance, and asset management and wholesale services. The paper also sets out core policy pillars: innovation and technology, regulatory environment, regional growth, skills and access to talent, and international partnerships and trade. | The overall aim is to help drive success to support the entire financial services ecosystem, including capturing benefits and mitigating costs. Stakeholders are asked for input to help identify opportunities and risks. |
| Policy paper on reforming UK MiFID II | Proposed changes in this 'next steps' paper include giving the FCA fuller powers of direction over reporting over-the-counter positions; revoking firm-facing requirements related to transaction reporting and organisational requirements; and giving the FCA more responsibility and flexibility to update standards efficiently in response to emerging market trends and risks. | These changes are noteworthy not only for managers who trade in liquid investments, but for all managers who are subject to the organisational requirements on matters such as disclosure, set out in the MiFID Organisational Regulation. |
| Launch of a "world-first" trading venue for private company shares (PISCES) | Known as the Private Intermittent Securities and Capital Exchange System (PISCES), this will allow trading in shares of private companies. The Government intends to establish PISCES by May 2025. | PISCES, designed to respond to the growth of private secondary markets, was consulted on by the previous government. HM Treasury has now published a consultation response and draft legislation. The share transfers are proposed to be exempt from stamp duty. |
The developments are broad and comprehensive and pick up on many of the hot topics in our Autumn 2024 Horizon Scan. You may also be interested in other recent client alerts listed below that relate to specific topics.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
