15 Nov 2024

The Chancellor's Mansion House Speech: what was in it for tech?

Yesterday evening, the Chancellor delivered her first Mansion House speech. This included a series of measures to supercharge financial services and promote ‘riskier investments’ to drive forward the UK Government’s economic growth mission. So what were the main announcements relevant for the tech sector?

You can read the Chancellor's full speech here.

The Chancellor announced plans to merge local government retirement schemes into 'Canada style' mega funds. This should unlock more capital for tech and science start-ups and scale-ups

Announced yesterday, the Chancellor will introduce a new Pension Bill next year to pool assets from 86 separate Local Government Pension Schemes (LGPS) in England and Wales into eight megafunds'. These are said to be worth an average of £50 billion each by 2030.

The Chancellor also announced plans to consolidate smaller defined contribution schemes across the UK from private businesses into pools of £25 billion to £50 billion.

This marks the most significant reform of the UK pension market in decades and broadly continues the Mansion House reforms announced last year. It should address barriers to greater availability of pension fund capital and encourage a vision that sees more investment into UK tech science start-ups and scale-ups.

This sees the Government seeking to replicate likes of Australia and Canada schemes by consolidating public sector pension schemes into larger, professionally managed funds. These larger funds can invest more significantly in riskier, long-term assets like infrastructure, start-ups, and private equity.

Of note, Labour's Start-Up, Scale-Up review highlights the UK’s late-stage funding gap for scale-ups, driven by a risk-averse investment culture and limited institutional funding. This gap is pronounced for tech and science scale-ups, as UK pension funds contribute less to VC than international peers. This is despite pension funds being a key global source of patient capital.

techUK called for the Government to unlock more capital into scaling firms in our Growth Plan, further enabling them to scale and stay in the UK, so this was a welcome move from the Chancellor.

We were also pleased to have signed a joint letter alongside Startup Coalition, BioIndustry Association (BIA),The Entrepreneurs Network, UK Business Angels Association, Tech Nation, UK Day One Project and Founders Forum Group supporting reform of the pensions system. You can view the full letter here.

A focus on harnessing the power of fintech and a new National Payments Vision to support the growth mission

The Chancellor emphasised the importance of leveraging fintech to enhance the competitiveness of the UK’s financial services sector. To support this, a range of initiatives were unveiled aimed at solidifying the UK's status as a global financial hub, attracting more investment and fostering greater innovation.

A key announcment was the introduction of the 'National Payments Vision', a roadmap to develop an innovative and secure payments sector and secure the ambition to deliver world-leading payments. The Vision responds to the findings of the independent Future of Payments Review 2023 and includes advancing Open Banking, Open Finance, and Smart Data. All will now come under the regulatory oversight of the FCA.

techUK called for the Government to move forward on the next stages of open banking and seize the opportunity of open finance in our Growth Plan so this was a welcome move. Indeed, it is encouraging that there is now a framework to deliver the next steps of open banking, where the UK is already a market leader, to open finance. Of note, it is anticipated to aid SMEs in overcoming an estimated £22 billion funding deficit through access to alternative lending models.

Reforming capital markets as a priority for the Government, benefitting scaling firms

In the speech, the Chancellor also committed to establish PISCES (Private Intermittent Securities and Capital Exchange System) an innovative stock market, by 2025. This will support companies to scale and grow and will be a world first cross-over market between private and public markets.

Of note, this was previously a recommendation from the Capital Markets Industry Taskforce and marks an intent on driving through innovative change to position the London Stock Exchange as a market of choice for UK and overseas companies seeking a listing.

It should tackle liquidity constraints, making it easier for scaling businesses to have earlier, more organised, periodic access to liquidity. This market should allow early-stage investors, employees, angels, VCs, and shareholders to exit or realise investments sooner while enabling new investors to access private companies earlier.

From the FCA, a new platform to allow private companies to trade their securities (PISCES) will support companies to scale up and grow and provide investors with better access to exciting companies. The FCA will now engage market participants, industry leaders, trade bodies and exchanges to develop a proportionate regulatory framework and will look to publish a consultation soon.

Regulation for growth

The Chancellor committed to make regulation more dynamic and more competitive. For instance, the Government will review the strategic guidance that they give the CMA and other major regulators to underline the importance of growth.

Taking action, the Chancellor outlined that new growth-focused remit letters to the Financial Conduct Authority, Prudential Regulation Committee, Monetary Policy Committee, Financial Policy Committee and the Payment Systems Regulator have been issued. These make clear that the Chancellor “expect them to fully support this government’s ambitions on economic growth”.

A call for evidence on the role of the Financial Ombudsman Service has also been published, looking at the how to improve how the Service operates and how it can better work with the FCA.

In our Growth Plan, we called for the Government to deliver a pro-growth regulatory system so we are pleased to see the Government taking further steps on this.

Green finance recognised as a UK growth engine

On the green finance agenda, the Chancellor unveiled pivotal initiatives aimed at leveraging the UK's leadership on net zero. These announcements underscore the critical role of green finance in driving sustainable growth and securing the UK's long-term economic competitiveness.

Announcements included ISSB adoption and the launch of the Transition Finance Council with the City of London, as vital to driving global standards and the IFRS assuming responsibility for Transition Plan Taskforce work, the value of transition plans to UK financial growth.

To ensure success and seize the economic opportunity, it’s essential to turn ambition into action, with commitments to Green Finance Capital and transition planning. Implementing this consultation package will help maintain the UK’s leadership in the high-growth net zero sector.

In our Growth Plan, techUK called for action to avoid further delays in adopting the ISSB framework and ensuring that the UK Sustainability Reporting Standards (SRS) are finalised by the first quarter of 2025, so we welcome these announcements.

A commitment to combatting fraud to protect integrity

As was trailed in the press prior to the speech, the Chancellor also committed to working with technology and telecommunications firms to reduce incidences and losses from fraud.

As a signatory to the Online Fraud Charter, techUK remains committed to working with all stakeholders to combat fraud and highlight the work that our members are doing in this space, often alongside and in partnership with law enforcement bodies.

The Mansion House speech outlined key areas that aim to drive forward the central mission for economic growth. techUK look forward to continuing to collaborate with the Government to make key areas of this vision a reality.

Neil Ross

Associate Director, Policy, techUK

Samiah Anderson

Head of Digital Economy, techUK

Mia Haffety

Policy Manager - Digital Economy, techUK

Edward Emerson

Head of Digital Regulation, techUK

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