More than 90 of Britain's most prominent business leaders have issued a powerful demand to Chancellor Rachel Reeves, urging her to use the upcoming Autumn Budget to compel pension funds to dramatically increase their investment in the UK economy.
The Call for Compulsory Investment
In a letter seen by major news outlets, the chief executives and chairs of leading companies including AstraZeneca, Rolls-Royce, and the UK divisions of Siemens and Siemens Energy have called for decisive action. They argue that UK pension funds currently invest less than 4% of their assets in UK-listed companies, a figure they describe as alarmingly low and detrimental to national economic growth.
The business leaders specifically want the Chancellor to implement measures that would require pension funds to disclose exactly how much they invest in British businesses. This transparency, they believe, would create pressure for change and help channel billions of pounds into domestic enterprises that desperately need capital for expansion and innovation.
A Growing Crisis in Domestic Investment
The intervention comes amid growing concern about the shrinking pool of capital available for UK companies. Analysis cited in the letter reveals a startling trend: defined contribution pension funds have reduced their allocation to UK equities from around 25% to just 6% over the past decade. This massive withdrawal of institutional support has left many British businesses struggling to find investment.
The signatories, who also include leaders from Legal & General, Phoenix Group, and Nationwide Building Society, emphasise that this isn't about protectionism but about creating the right conditions for sustainable growth. They point to successful models in countries like Australia and Canada, where pension funds play a much larger role in supporting domestic economic development.
Their proposal suggests that by redirecting even a small percentage of the £3 trillion held in UK pension funds toward British businesses, the government could unlock transformative investment in sectors ranging from technology and renewable energy to infrastructure and manufacturing.
Political Pressure and Potential Solutions
The Treasury has acknowledged receiving the letter and indicated that improving domestic investment is a key priority. However, officials face the challenge of balancing this objective with maintaining pension fund returns and not alienating the financial services industry.
Potential solutions being discussed in Whitehall include:
- Mandatory disclosure requirements for pension fund allocation
- Tax incentives for funds that meet certain UK investment thresholds
- The creation of new British investment vehicles designed to attract pension capital
The business leaders argue that with the Autumn Budget scheduled for presentation to Parliament, the Chancellor has a perfect opportunity to address what they call a "market failure" in capital allocation. They believe that without government intervention, the trend of disinvestment will continue, potentially leaving innovative UK companies at a competitive disadvantage against international rivals who benefit from stronger domestic support.
As the Budget preparations enter their final stages, all eyes will be on whether Rachel Reeves heeds this powerful call from Britain's corporate leadership or opts for a more cautious approach to pension fund reform.
