Reeves Unveils Ambitious Growth Plan at Mansion House, Launching PISCES and Digital Gilts
In a bold move to revitalize the UK's capital markets, Chancellor Rachel Reeves used her Mansion House speech on 14 November to announce the establishment of the Private Intermittent Securities and Capital Exchange System (PISCES) by May of this year. This initiative, first proposed by former Chancellor Jeremy Hunt, aims to create a world-first regulated market for trading private company shares, exempting transfers from stamp duty taxes.
Reeves emphasized the importance of the financial services sector to the UK economy, stating, "Before we came into government, I was clear that the financial services sector must play a central part in our economic vision and our plan for economic growth." Acknowledging the increasing competition in the global financial landscape, she stressed the need to actively maintain the UK's leading position.
PISCES: A Bridge Between Public and Private Markets
PISCES is designed to offer a unique blend of public and private market features. It will incorporate multilateral trading, characteristic of public markets, while allowing companies greater discretion over public disclosures, a feature common in private markets. This innovative approach seeks to:
Facilitate access to capital: Early-stage companies will gain improved access to funding, enabling them to grow and develop within the UK.
Enhance liquidity: Shareholders in private companies will have a platform to trade their holdings, improving liquidity and allowing them to realize gains.
Encourage long-term growth: By providing an attractive environment for private companies to thrive, PISCES aims to boost the UK's long-term economic growth prospects.
This initiative addresses the growing trend of companies remaining private for longer periods. Research from Morningstar indicates that the median age for a company to go public has increased significantly in recent years, highlighting the need for alternative funding avenues.
Digital Gilts and a Focus on Growth
Alongside PISCES, the government launched a pilot scheme for a Digital Gilt Instrument utilizing distributed ledger technology (DLT). This move demonstrates the government's commitment to innovation in financial services.
Reeves also outlined a comprehensive growth strategy for the domestic financial services sector, with plans to publish the first-ever Financial Services Growth and Competitiveness Strategy next spring. This strategy will focus on five key areas:
Asset management and wholesale services
Capital markets
FinTech
Sustainable finance
Insurance and reinsurance
To ensure industry engagement and foster confidence in the government's plans, the Treasury will publish a Call for Evidence alongside the new strategy.
Addressing the Exodus of UK Companies
The initiatives announced by Reeves aim to address the concerning trend of UK-founded companies seeking listings on foreign exchanges, particularly in the US. Companies like ARM Holdings, Abcam, and Ferguson have recently opted for US listings, raising concerns about the attractiveness of the UK's capital markets.
Richard Oldfield, the new group CEO of Schroders, welcomed the government's focus on risk-taking and growth, stating, "It is great to see the government putting sensible risk taking back at the centre of our economy."
Sustainable Finance and ESG Regulation
Reeves also emphasized the importance of sustainable finance, announcing draft legislation to regulate ESG ratings providers. This move seeks to boost investor confidence in sustainable companies and solidify the UK's position as a global leader in sustainable finance.
A Pro-Growth Agenda
The chancellor concluded her speech by highlighting the comprehensive nature of her reforms, stating, "Taken together, these measures represent the most pro-growth financial services package since the financial crisis."
Reactions and Outlook
The announcements have been met with positive responses from industry leaders, with Karen Northey, director of corporate affairs at the Investment Association, stating that the proposals "indicate a positive shift towards a growth-focused mindset."
The success of these initiatives will depend on effective implementation and continued engagement with the financial services industry. However, the chancellor's ambitious plans signal a clear commitment to revitalizing the UK's capital markets and fostering a more dynamic and competitive financial sector.
