And when it comes to the new government’s approach to UK capital markets, indications to-date suggest we should expect more of the latter than the former.

Continuity: Finishing the job

Last year Labour published its Financing Growth paper, which set out its plans for financial services.

The paper demonstrated an intent to move from ideas to delivery. This means ensuring that reforms already in the pipeline to boost the competitiveness of our primary and secondary markets are implemented quickly and effectively.

Key financial services initiatives progressed by the last government, including the Financial Services and Markets Act 2023 and the Edinburgh Reforms, were broadly supported by the new government when in opposition. 

And while we are only weeks into the new administration, the signs are already there that we will see more continuity than change. 

Take for example the City Minister Tulip Siddiq’s celebration of the FCA’s recent overhaul of listing rules as an important first step in the government’s mission “to truly reinvigorate our capital markets.”

We are hopeful that the Treasury will now turn to delivering a range of other regulatory reforms that were progressed by the previous government, whether that’s on investment research rules on UK public companies, or taking forward the work of Sir Douglas Flint to digitise shareholding.  

Change: Activist government and growth

This government shares the last administration’s concerns about UK companies choosing to list in the US and elsewhere in recent years. But what is discernible in speeches and public statements, is that Labour views competitiveness through a broader lens than the number of UK IPOs. 

What these statements reveal is a greater emphasis on the role that competitive capital markets can play in delivering growth in the wider UK economy.

One area, where Labour may look to offer distinction, is its approach to pension reform. 

While it was a priority of the last government to incentivise pension schemes to increase their holdings in both listed UK equities and unlisted UK companies, Labour may be bolder in pushing funds to consolidate. 

This can be seen in the government’s decision to appoint Emma Reynolds as Pensions Minister, sitting across both Treasury and the Department for Work and Pensions,  to oversee the flagship pension review. 

Within days of Labour winning the election, the Chancellor also announced that the UK Infrastructure Bank – capitalised with an additional £7.3 billion in funding – and the British Business Bank would be aligned under a new National Wealth Fund.

The National Wealth Fund – with UK Finance members represented on its independent taskforce – aims to catalyse private investment in priority sectors such as green industries, emerging technologies and infrastructure. 

What unites the two announcements is the signal that state interventions and public finance initiatives will play a greater role in mobilising institutional capital for British businesses, industries and infrastructure.

Capital gains tax: To raise or not to raise 

Following concerns raised by the private equity sector, the Chancellor clarified that her plans to “close the loophole” for tax on carried interest would only apply if fund managers had not invested their own capital.

The Treasury has however notably declined to rule out a potential increase in capital gains tax (CGT) - a levy on any profit made on the sale of an asset, including shares – in the Autumn budget.

A potential hike in CGT may further disincentivise investment in productive assets, when the government’s stated aim is to do the opposite. 

Technology: Blockchain and crypto

Under this government, we are unlikely to see any repeat of the then-Chancellor Rishi Sunak’s announcement in 2022 that the UK would become a global hub of cryptocurrencies.

As we saw in their criticisms of the last Government’s approach when in opposition – Labour has an instinctive caution when it comes to speculative cryptoassets.

FTX and other scandals, and the volatility we have seen in stablecoins, has resulted in policymakers across the political spectrum  growing sceptical of cryptocurrencies.

The Chancellor and City Minister are however likely to be interested in the potential of applying the underlying blockchain technology to real world assets.

This can be seen in Labour’s Financing Growth paper, which promised to advance work on the tokenisation of securities and to explore the possibility of a pilot issuance of tokenised gilts via the Debt Management Office. 

This is an area to watch.

Retail: Tell Sid

The prospect of a British ISA looks in doubt, although Financing Growth made clear that Labour sees increasing retail investors’ participation in capital markets as a key priority.

HM Treasury may well look to industry for ideas on how to boost retail investment in UK equity markets. 

Looking ahead

The story, at least so far, is largely one of continuity rather than change in the new government’s regulatory agenda for capital markets. 

However - given there may be differences in the role that Labour wants pensions and the National Wealth Fund to play in driving growth - UK Finance sees real value in continued engagement to ensure the right outcomes for our economy and our industry.  

I’m delighted to have recently joined the Capital Markets and Wholesale Banking policy team at UK Finance, and look forward to working with members to make the case that well-functioning, competitive capital markets are key to the success of the growth agenda.