New Calls for a UK Investment Strategy which supports industries with world-class capabilities

As the UK prepares for the upcoming International Investment Summit in October 2024, speculation grows about how the government will shape its industrial investment strategy to attract further investment. With global business leaders and investors attending, the summit aims to position the UK as a premier investment destination, showcasing a vision for economic growth supported by major policy announcements.

ICAEW’s Head of Corporate Finance, David Petrie, has outlined a wish list for the government’s industrial strategy. ICAEW is calling for a well-thought-out plan that fosters additional investment, aligns with the nation’s economic growth mission, and supports industries where the UK has world-class capabilities.

Encouraging Investment in Key Sectors

The UK government’s investment strategy will be central to the Summit, and David Petrie hopes for clear announcements on investment priorities. He notes that the government should focus on areas that genuinely need support, especially considering the significant shortfall in public finances.

“The case for using taxpayer money to support British industry should be clear,” Petrie says. “Public funds should not be directed toward assets or businesses already receiving ample funding. Instead, resources must be allocated to sectors with genuine additionality and where private capital can support infrastructure projects.”

The launch of the £7.3bn National Wealth Fund is one such effort aimed at attracting private sector investment. By reducing risks for private and institutional investors, the fund will help finance the innovative assets necessary to meet the UK’s net-zero goals and remain competitive internationally.

Unintended Consequences of Industrial Support

While the government’s focus on key industries is vital, Petrie also highlights the risks of unintended consequences. SMEs (small and medium-sized enterprises) remain the backbone of the UK economy, and fiscal policy must ensure they can attract funding, even if they are not direct beneficiaries of public investment.

“We must be careful that government support doesn’t disincentivise broader business sectors,” Petrie warns. “Fiscal policy should encourage SMEs to attract both debt and equity funding, for example, by improving access to R&D tax credits and continuing support for equity investment incentives like the SEIS, EIS, and VCT schemes.”

The government’s investment strategy must promote overall economic growth, not just focus on picking specific winners. An environment where businesses have the freedom to operate and grow will ultimately generate more tax revenue and job opportunities, benefiting the broader UK economy.

Addressing Barriers to Investment and Growth

ICAEW has made several recommendations to the government in its pre-Budget submission, suggesting actions necessary to deliver on the Labour Party’s promise to boost economic growth. The submission highlights the need to remove barriers to investment and increase funding in key areas, such as R&D.

One of the key recommendations involves examining pension fund risk profiles and their impact on infrastructure investments. ICAEW also calls on the government to find ways to stimulate demand for UK-listed equities, which will help build a more dynamic capital market.

Attracting private investment into infrastructure and innovation projects is crucial for economic growth. However, without adequate incentives or the removal of existing barriers, institutional demand may remain low, leading to stagnant equity markets. Encouraging pension funds to invest in UK equities is one measure Petrie advocates for, suggesting that this would enhance pricing and capital market liquidity.

A Holistic Approach to UK Investment Strategy

As the government prepares to unveil its plans at the International Investment Summit, ICAEW’s message is clear: the UK’s investment strategy must go beyond short-term wins and create a sustainable, long-term environment for economic growth.

Petrie emphasises that while supporting high-potential industries is important, it’s equally crucial not to overlook the broader business landscape. “We need a strategy that benefits the entire economy and allows people to run their businesses in ways that ensure their success and profitability. A strong business sector will create more tax revenue and jobs, fostering a healthier economy.”

Furthermore, with no indication that the new government intends to reverse the capital markets reforms introduced by the previous administration, the industry eagerly awaits more concrete measures to stimulate institutional investment in British companies. Policies that incentivise pension funds to invest in UK-based businesses could be key to revitalising the market, but without the right approach, pricing challenges will remain.

Conclusion: A Forward-Thinking Strategy for UK Investment

With the International Investment Summit just around the corner, the government has a pivotal opportunity to unveil a robust investment strategy that prioritises long-term economic growth. As David Petrie and ICAEW emphasise, the UK’s industrial strategy must address key areas such as supporting SMEs, improving infrastructure investment, and ensuring that fiscal policies encourage broad-based economic growth.

At K2 Accountancy Group, we understand the evolving investment landscape and are here to support businesses navigating these changes. Whether you’re seeking advice on government incentives or assistance with corporate finance and tax planning, our team is equipped to help you make the most of the UK’s emerging opportunities.

All information in this article should be considered general and not specific advise from the K2 Accountancy Group or its brands. For information and advice regarding your own personal or business circumstances, please contact us directly.