Michael Moore’s Outlook on why political signals matter to investors
In case you missed the news, there will be a general election in the UK next year. Congratulations if you tuned out of the party conference season over the past few weeks, where this was the dominant theme, and the party leaders teased their manifestos for 2024. But good luck to you pulling off that trick for a further twelve months.
My guilty admission is that I cannot get enough of the conferences. For over twenty years I headed to the seaside resorts and the inner cities where they are held, as a requirement of my day job. Released from the duty, a by-product of losing my seat in the House of Commons, I was an absentee for a number of years. Now I get to go to three or four a year and love it. I am sure there is help available.
Do they matter? Oh, yes. They may be formulaic and predictable in many ways (and all quite similar, whatever the protestations), but there is nowhere better to get a sense of the political mood, the dividing lines between the competing parties and to judge the credibility of the main protagonists. And there is usually the additional bonus of learning more about key policies likely to affect investment decisions or the industry’s licence to operate.
In short, at this stage in the political cycle, there is no better place to get up close and hear leading figures in all the parties frame their agenda, signal their intentions for the macro economy (consciously and unconsciously), and set out their plans on taxation. Or not, as the case may be.
It also lets outsiders test political leaders’ views on the biggest challenges of the moment, such as climate change, artificial intelligence, life sciences and other areas where public investment will need to be supplemented by private capital and private sector expertise. In the midst of all the political noise, the signalling on this matters, too.
At the same time the conferences provide the opportunity for us to rehearse what industries like ours can do in partnership with governments to deliver public value and achieve key public policy objectives.
On that our pitch is simple: the UK is focused on sustainable growth, our industry will deliver a significant share of it, and with the right investment climate we can deliver more. To underline that opportunity, there’s £145 billion of dry powder to draw on, and the largest hub of private capital activity and expertise anywhere outside north America. In other words, we are well placed to make good on our side of the bargain in terms of both speed and scale.
In a series of discussions in recent months, in Downing Street and elsewhere, we have explored how private capital can play its part in a growth partnership, and what private equity and venture capital need in return to make this work. Put in high level terms, it is again reasonably straightforward – the UK needs to attract global capital at increasing scale, ensure its private capital investment management hub remains internationally competitive, and offer investment opportunities backed by long term policy frameworks.
None of this is new, of course. As I mentioned here a few months ago, the US Inflation Reduction Act and the EU Green Industrial Plan provide real opportunities, and therefore serious competition, in attracting the capital and deploying it. Meanwhile, continental European countries are busily seeking to attract (back) investment practitioners who are based in the UK.
For all that we are confident we make a compelling case for policymakers, we need to keep a sense of perspective. At the risk of stating the obvious, elections matter for all sorts of reasons that have nothing to do with private capital, and understandably so. The issues on the agenda in political conference halls this autumn reinforce the point.
Nevertheless, there is inevitably a wariness in the industry when political leaders’ priorities to create dividing lines between the parties blurs the clarity of policies which are essential to drive investment.
Whether it is the timescale for major infrastructure projects, or the strength of commitment to milestones on the road to net zero, political choices have investment consequences. As we navigate further into the autumn and the drumbeat of election pledges gathers speed, the list of specific policy priorities will be poured over.
And a higher level assessment will be made of how reliable policymakers are likely to be. That is the key to driving the investment. The signals picked up by voters are also heard by investors – the right ones will be key to making a success of the growth partnership we are committed to.
Michael Moore
Chief Executive, BVCA
This article was originally published on 3 October 2023 on the Private Equity News website here.
