Prime minister Keir Starmer has pledged to remove regulations that “needlessly hold back investment” as he seeks to attract international money into the UK.
The government hosted an International Investment Summit at the Guildhall in London today to boost support for domestic projects in growing sectors such as artificial intelligence (AI), clean energy and infrastructure.
It comes as domestic investment has dwindled in recent years, with inflows into UK equity funds remaining low and UK stock markets lagging other major indices.
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Much of the focus of the summit has been on attracting investment from larger companies and institutions – a move criticised by smaller businesses – but is there an opportunity for UK retail investors?
What is the International Investment Summit?
The much-anticipated Autumn Budget later this month may be focused on tax rises but the government is also trying to plug gaps in public finances and boost the UK economy by attracting international investment.
The aim is to fund more UK projects, creating jobs and ultimately generating economic growth.
The International Investment Summit will kickstart this policy.
The government has already announced more than £24 billion worth of investment in clean energy projects and has created an industrial strategy as well as creating a National Wealth Fund and British Growth Partnership to make use of pension fund investments.
It is also hoping to unlock the housing market by reforming planning, and boost infrastructure projects.
Some of this was almost derailed over the weekend after transport secretary Louise Haigh described P&O Ferries owner DP World – which sacked 800 crew without warning in 2022 – as a “rogue operator”.
There were reports that UAE-owned DP World would scrap its planned £1 billion investment in the London Gateway container port, but this will now go ahead.
Australian firm Macquarie has also promised to invest £20 billion in the UK over the next five years, including an electric car charging network.
But there is some concern that the needs and potential contribution of small businesses are being ignored.
Douglas Grant, group chief executive of Manx Financial Group, said the timing feels like a classic publicity move, coming just two weeks before Labour’s first Budget, which is expected to include tax hikes that will take some of the shine off the news.
“Why bundle all these positive investment deals together in one event, as it feels more contrived than the natural rhythm of investment,” he says.
“Furthermore, we cannot overlook the ongoing fiscal uncertainty that has left many small and medium-sized enterprises (SMEs) and households hesitant to invest. The commitments from international giants are encouraging but will not offer immediate relief or drive short-term change. Meanwhile, SMEs, which are the backbone of our economy, are still facing significant pressure.”
Gabriel McKeown, head of macroeconomics at Sad Rabbit Investments, urged the government to focus more on smaller firms as they need it most.
“The government is rolling out the red carpet for big business, and despite the declaration that Britain is ‘open for business’, this comment feels laughable against a backdrop of continued economic uncertainty,” he says.
“While it is great that multinationals will find it easier to build a data centre, many small businesses just want to make it through to the end of the year.”
Can retail investors benefit from the International Investment Summit?
The government may not be seeking direct investment from the public but investors could benefit indirectly if the summit provides an economic boost.
One way you could benefit is if your pension fund backs the British Growth Partnership.
This has been set up by the Treasury as part of the British Business Bank and will encourage more UK pension fund investment into the UK’s fastest growing, most innovative companies.
But John Choong, head of equities and markets at Investors Edge, warns there are other factors against investing in the UK.
“For one, the 0.5% stamp duty on share purchases — the world’s second-highest — makes Britain a tough sell for foreign investors, especially given the lower returns compared to the US and Europe,” he says.
“What’s more, rumoured plans of capital gains tax doubling could further dampen enthusiasm, as investors may be turned off by the possibility of having their investments ‘locked in’ during a high-tax environment. The spectre of additional windfall taxes on oil giants like Shell and BP – key FTSE 100 constituents – looms large over index growth as well.”
It’s not all doom and gloom though, he says, adding: “Proposed planning reforms could breathe new life into the housing sector, benefiting housebuilder and bank stocks, as increased supply may finally meet pent-up demand. Meanwhile, retail stocks could also see a boost if business rates undergo significant reform, as it would trim costs, and boost earnings.”
But other analysts are more cautious about how much investors could benefit.
“If you buy the narrative that the new government is going to spark a growth boom then you might consider buying UK shares – though the market is quite international in nature,” says Laith Khalaf, head of investment analyst at AJ Bell.
“By looking further down the market amongst mid and small caps you can get more domestic exposure, but it’s still not a totally pure play.”
Khalaf adds that the reality is that fund investors have been “relentlessly selling down UK holdings for the past eight years”.
He adds: “There’s a bit of a chicken and egg situation at play here, as they aren’t likely to perform a volte face unless they can see performance picking up.
“There is also a powerful secular trend towards passive investing taking place, which favours a global rather than a domestic approach. I wouldn’t suggest investors diverge from their considered investment strategies as a result of the investment summit but they might keep an eye out for ideas to rule their thumb over.”
