Rachel Reeves should use the multibillion pound surplus in public sector pensions to give the UK’s most-promising scale ups crucial capital that will prevent them from listing abroad, a top accounting firm has said.
Blick Rothenberg issued a rallying cry to the Chancellor to use her upcoming Spring Statement to lend some much-needed support the UK’s fastest-growing companies, many of which “are exploring options to list in the US… or the Middle East”, the firm said.
Rachel Reeves is expected to deliver a Spring Statement on 26 March that is stripped back by historical standards alongside the Office for Budget Responsibility (OBR) publishing a rehashed forecast for the UK economy.
Speculation is growing that the Chancellor may have to raise further taxes – or announce deeper spending cuts – if the OBR revises down its growth outlook and leaves the government without any headroom and in breach of its fiscal rules.
Simon Gleeson, a partner at Blick Rothenberg, called on the government to to use the set piece moment to give an “urgent” boost to late-stage private companies, and identified a pool of capital that she could free up to do so.
“London’s market is increasingly appearing less attractive compared to its peers,” he said, highlighting the fact that last year 88 firms delisted or were taken private from the London Stock Exchange compared with just 18 initial public offerings.
“£60bn has been quoted by the government in pension surpluses in defined benefit schemes,” he added. “The money from this initiative would give businesses the investment they need to continue to grow and be an incentive for them to stay in the UK.”
Gleeson argued that unlocking the pension capital move would be the “confidence booster” that London markets needed, but warned time was tight with firms beginning to eye up their events and listings for the next fiscal year.
Investors in start-ups with fewer than 250 employees already benefit from generous tax incentives under schemes known as EIS and SEIS. The vehicles provide individuals with outsized tax relief on investments into fast-growing UK start-ups, which can rise up to 50 per cent.
The schemes are attributed with funnelling billions of additional capital into entrepreneurial firms. But Gleeson warned Reeves that bigger companies mulling a potential float are often not in a position to benefit from either scheme, and need more sizeable pots if they are to move the needle.
“Late-stage entrepreneurial businesses [and] pre-initial public offering companies… both need larger funds to grow than can be obtained from EIS and SEIS investments,” he said. “The proposed £60bn would go a long way to support them.”