Britain has assets seeking returns, firms hungry for capital and a financial centre that can bring them together. It can do better
Save time by listening to our audio articles as you multitaskBut Britain is not a good place to turn promising startups into titans. There are many reasons for that, from Brexit to poor productivity. But a big stumbling block is that asBy the time these companies are raising tens of millions of dollars, rather than a few hundreds of thousands, their share of globalfunding has halved.
America provides a sobering contrast. It has spawned four trillion-dollar behemoths in the past five decades. Britain has not created a business worth even a tenth as much in more than a century. In 2011 the100 index of leading shares contained only two globally respected tech firms, Autonomy and Arm. Now it has none. Autonomy has been sold to Hewlett-Packard, an American giant, and its reputation tarnished by fraud claims .
What should be done? One focus ought to be to simplify corporate-governance rules. Britain has had more iterations of its baroque governance code in the past 25 years than it has had prime ministers. The result is a tangle of worthy disclosure requirements that distracts fledgling firms. Another should be to seek to attract those rare experts capable of making sensible commercial decisions in deep-tech areas like quantum computing. Britain’s excellent research universities are already a lure.
But the top priority is to direct the £4.6trn of assets held in British pension and insurance funds into more productive areas. Less than 1% of these assets is in unlisted equities. Defined-benefit pension schemes’ allocation to the British stockmarket has sunk from 48% to below 3%. The government should dilute the pension-fee cap that crimps investment in early-stage firms.
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