- City bosses challenge Chancellor over EU rules
- EU regulations cost UK £7bn annually
- Demands for regulatory reform intensify
In a letter to the Chancellor this week, city administrators demanded that he eliminate absurd European Union regulations that harm savers.
Sir Douglas Flint, one of the most esteemed personalities in finance and chairman of investment firm Abrdn, is among the over 130 money managers who have signed the letter to Jeremy Hunt.
They contend that the controversial EU regulations cost the United Kingdom £7 billion annually, which could be invested in renewable energy, road and rail maintenance, or hospital construction.
Notwithstanding Brexit, British investment trusts remain subject to contentious regulations.
Historically, trusts have been present in the United Kingdom since the Victorian era, during which they provided financial support for engineering endeavours such as railways. Modern trusts continue this tradition by investing in infrastructure, renewable energy, transportation, and other sectors.
On the stock market, 361 investment trusts are listed. They control a combined £267 billion worth of assets.
Flint and his executive colleagues contend that the trusts are imperilled due to regulations that dramatically inflate the perceived investment costs beyond what they are.
Former chairman of the banking behemoth HSBC, Flint, stated that the regulations were “an impediment to obtaining funds for the infrastructure that we so desperately require.”
“We must make it attractive for people to invest in the United Kingdom and to fund infrastructure through their retirement plans,” he continued.
Additionally, Justin Dowley, chairman of the FTSE 100-listed Scottish Mortgage Investment Trust, urges Hunt to act as the EU imposes regulations on investment trusts. Although there is no legal obligation to implement them due to the United Kingdom’s decision to leave the European Union, the Financial Conduct Authority (FCA), a regulatory body based in the city, is draconian in its enforcement.
Trusts are consequently placed in the peculiar circumstance of having a significant portion of their expenses double-counted. According to activists, this situation is distinct from that in the United Kingdom.
As a result, investment trusts have been depleted of cash and rendered susceptible to foreign takeovers, as the value of a significant portion of their shares has plummeted. The City administrators warn Hunt in a letter published over the weekend that the regulations are “severing” vital funding.
Critics assert that the regulations risk impeding financial resources from reaching sectors the Chancellor aims to advance, including biotechnology, science, and renewable energy.
The letter states, “This is driving British investors’ capital into companies listed overseas, which is contributing to the poor performance of the UK stock market and is having negative effects on investment in the UK.” This cannot be permitted to persist. The interpretation of the UK needs to be revised. Implementing a strategy similar to that of the rest of the world could recoup lost investments amounting to over £7 billion annually, all at no expense to the taxpayer.
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The statement continues, “We urge the Financial Conduct Authority and the Government to take immediate action to end this situation and restore the United Kingdom to a competitive position.”
The campaign has received support from AJ Bell, a prominent investment platform in the United Kingdom.
Senior politicians, such as former minister of expenditures Baroness Altmann, also favour an overhaul.
Lord Davies of Brixton of the Labour Party and Baroness Bowles of the Liberal Democrats are among the peers supporting Altmann’s effort to pass legislation through Parliament that would exempt investment trusts from these regulations.
We recognise industry concerns and are working at pace with the FCA to reform the UK’s retail disclosure regime, including for investment trusts,” a Treasury spokesman said. We will provide additional information regarding these reforms shortly.
