Finance Leaders Urge UK Chancellor to Address EU Rules Impacting Investment Trusts

Leading figures in the UK's financial sector have called on Chancellor Jeremy Hunt to review and potentially scrap certain EU regulations which they claim are stunting investment opportunities and costing Britain billions annually. This plea is highlighted in a letter authored by more than 130 top money managers, including the highly esteemed finance veteran, Sir Douglas Flint, chairman of Abrdn.

Financial Titans Challenge EU Regulations

The regulations in question originate from the European Union and are currently still enforced on British investment trusts—despite the UK's departure from the EU. These trusts, which traditionally play significant roles in funding large-scale projects in sectors such as renewable energy and infrastructure, are now considered to be at a disadvantage due to the way these EU regulations calculate investment costs.

The £7bn Annual Loss

Industry experts, like Flint, argue that misrepresentation of investing costs due to these regulations is causing the UK to miss out on £7 billion in potential investments each year. Money that could otherwise support vital national projects is being diverted, with significant long-term implications for the UK economy. Investment trusts are deemed critical in this aspect as they manage a considerable sum of £267 billion in assets across the stock market.

The Brexit Conundrum

The implementation of these EU rules post-Brexit has been met with confusion and frustration. The Financial Conduct Authority (FCA) has been identified as the enforcer of these rules, which some claim are even more stringent than when the UK was an EU member. The consequences have led to reduced investment in trusts, making them prone to sell-offs and foreign takeovers as share prices plummet.

Urgent Call for Reforms

Not only financiers but also politically influential figures like former pensions minister Baroness Altmann are championing change. The group's letter to Chancellor Hunt warns that if left unchecked, the UK's flawed adherence to these dynamics will continue deterring investment and underperforming in crucial market segments. There's a concerted push for synchronizing the UK's approach with global standards to reclaim the lost investment without affecting taxpayers.

Government Response and Support for Change

Backed by entities like investment platform AJ Bell, and with vocal support in Parliament striving to exclude investment trusts from these stifling rules, there's a clear indication of momentum for reform. The Treasury has acknowledged the issue and announced that work is underway with the FCA to reevaluate the UK's retail disclosure regime. Details on these reforms are expected to be shared in the near future.

Investment, Regulations, Finance