UK finance minister Jeremy Hunt claimed in his budget speech in March that, with more AI startups than anywhere else in Europe, the UK is on track to become the world’s next Silicon Valley.
You wouldn’t know if you just invest in tech IPOs. The UK doesn’t have many of those, or indeed any other kind.
“I want our brilliant technology entrepreneurs not just to start here but to stay here, including when the time comes for a stock market listing,” Hunt proclaimed.
He went on to list a series of steps beyond the already announced Edinburgh and Mansion House reforms to make it easier for companies to list by relaxing many of those pesky investor protections.
Hunt’s cunning plan is to require defined contribution and local government pension funds to disclose publicly their level of international and UK equity investments with the threat that he will consider further action if they don’t jolly well buy British.
To encourage a new generation of retail investors, the UK Treasury will also proceed with the sale of part of the government’s remaining NatWest shares, now worth around £7 billion, at the earliest opportunity and introduce a new ‘British ISA’, which will allow an additional £5,000 annual investment in UK equity, free of tax.
Coutts, the private banking arm of NatWest, is also concerned about generating the best returns for investors. But it is taking a different approach.
At the end of April, Fahad Kamal, chief investment officer at Coutts, announced a fundamental change. It will invest much more of its clients’ money in international equities and much less in the UK.
“Currently, about 20% of a standard balanced portfolio here is UK stocks, which is something of an anachronism,” Kamal said. “It would be closer to 3% or 4% if it were more commensurate with the proportion of UK stocks in global stock markets.”
So this, he explains, is a “recalibration”.
Kamal pointed out that the UK market today looks similar to how it was 100 years ago, while the US market had changed dramatically, with many of its leading companies not existing 20 years ago.
Coutts’ multi-asset strategist David Broomfield twisted the knife. Investing in global instead of domestic equities, he says, “enables us to get access to today’s mega themes – such as technology – which are more difficult to access through the UK”.
It’s almost as if these people don’t listen to the government telling them where to invest.
Controversy
Coutts attracted much controversy last year when it decided that Nigel Farage, a UK politician who campaigned for Brexit, no longer qualified for an account. Its latest announcement caused more gnashing of teeth in the more jingoistic UK press, who calculate it will pull out another £2 billion that the UK market can ill afford to lose.
Surely, this is a narrow view. Money goes where the good investments are. At the Berkshire Hathaway shareholder meeting in May, Warren Buffett confirmed he had been selling some highly valued US stocks and had built up cash and equivalents to more than $189 billion.
His big problem is where to invest it.
Shouldn’t Hunt be hitting the phone? OK, Buffett prefers value to growth. But as well as sitting in the new Silicon Valley, Hunt also has a bank to sell. You can just imagine Buffett’s response.
“Thank you. Do you have another 20 of those?”