Julia Hoggett, chief executive of the London Stock Exchange Group (LSEG), called for the UK to change its “perverse” attitude towards retail investment.
Speaking on the Following the Rules podcast, Hoggett pointed out that retail investors could more easily invest in crypto than in heavily regulated assets, like corporate debt or government bonds.
“We have a regulatory structure that has historically made it easier to buy a riskier product and then hardest to buy the least risky product in the stack, which is perverse,” she said.
“(Debt) sits higher up the cap table in terms of its credit worthiness than equity, and yet we have made it harder for retail to buy plain vanilla debt…than we have equity or crypto,” she said.
She argued that it should be “much more straightforward” for retail investors to participate in these markets, which would help lower the cost of capital for businesses and drive growth.
Under rules set out after the financial crisis, bonds issued under £100,000 were classed as retail products, and so were subjected to closer scrutiny.
The changes inadvertently dissuaded firms from issuing smaller denominations and shut out individual investors from the market.
A recent Barclays report found that US retail investors held some $6.2 trillion in debt securities at the end of the third quarter of 2024, while just 36 corporate bonds from 21 firms were listed in the UK’s orderbook for retail bonds.
Hoggett pointed out that while regulators were keeping stringent rules on corporate debt, retail investors could have “all the access to (crypto) in the world”.
Last month, the Financial Conduct Authority (FCA) put forward plans to improve retail access to the corporate bond market, by taking away extra paperwork for small tranches of debt.
The attitude towards retail investment reflected a broader problem with risk, Hoggett argued, which has been a serious impediment to economic growth.
“The UK’s got the second largest pool of institutional capital in the world. We have not been spending it on ourselves as a nation, and we have been de-risking it to a point that has not been healthy for ourselves,” the LSEG boss said.
“Our investment gap, compared to our peer countries…could be as much as eight per cent lower than our G10, G20 peers. And that is the reason why we’ve seen the reduction in growth and therefore the reduction in tax revenue to pay for the very things that we want as a society.”
Hoggett argued that the UK could not run a “zero failure regime”, and instead needed to put in place real world KPIs – such as enabling the green energy transition or improving financial security for retirees – which could guide both investment funds and regulators.
“The biggest thing that is still left to do is basically re-incentivising investment in the UK,” she said.