Mansion House speech

On 10 July 2023, HM Treasury published Chancellor Jeremy Hunt’s Mansion House speech.

In his speech the Chancellor discusses the government’s long term reforms to UK competitiveness and also the challenge of tackling inflation.

In relation to UK competitiveness the Chancellor focuses on three areas – pensions, listings and smart regulation.

Key points regarding pensions include:

  • The announcement of the ‘Mansion House Compact’ where many of the largest defined contribution pension schemes commit to the objective of allocating at least 5% of their default funds to unlisted equities by 2030.
  • The Department for Work and Pensions (DWP) will publish a joint consultation response with the Pensions Regulator and the FCA on the Value For Money framework, clarifying that investment decisions should be made on the basis of long-term returns and not simply cost.
  • The government will set out plans on introducing a permanent superfund regulatory regime to provide sponsoring employers and trustees with a new scaled-up way of managing defined benefit liabilities.
  • The government will launch a call for evidence on the role of the Pension Protection Fund and the part defined benefit schemes play in productive investment.
  • The government will look at the culture of investment decisions and improve the understanding of pension trustees’ fiduciary duty across both defined benefit and defined contribution schemes. The DWP and HM Treasury will jointly launch a call for evidence to explore how it can overcome barriers and ensure a focus on good saver outcomes.

Key points regarding listings include that the government:

  • Is publishing draft legislation on prospectus reforms, delivering another milestone of Lord Hill’s UK Listing Review.
  • Welcomes the Investment Research Review and has accepted all recommendations made to it.
  • Will establish a pioneering new “intermittent trading venue” that will improve private companies access to capital markets before they publicly list. This will be up and running before the end of 2024.

In terms of smart regulation, the Chancellor notes that the government recently passed into law the Financial Services and Markets Act and that it will be launching an independent review into the future of payments.

FCA statement

The FCA has also issued a statement welcoming the Chancellor’s Mansion House speech.

On the Investment Research Review the FCA statement provides:

  • The FCA will start engaging immediately with market participants. This engagement will inform the content of any consultation proposals.
  • Subject to the feedback, the FCA will consult on an accelerated timetable on potential regulatory changes that could introduce more options on how to pay for investment research so as to achieve an outcome of improving investor research into markets while providing value for money to institutional and retail investors.
  • The FCA will take feedback from the market on the timing of any rule changes, driven by market need and firms’ operational capacity to absorb changes. Subject to this detailed consultation feedback and FCA Board approval, the FCA will aim to make relevant rules in H1 2024.