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My company is raring to invest billions into the economy, but there’s nowhere for the money to go, writes Pension Insurance Corporation CEO Tracy Blackwell
It’s been just over 100 days since the government came to power and the Prime Minister promised to “take the brakes off Britain”. At this week’s Investment Summit, the Cabinet is setting out an optimistic, pro-growth pitch to business leaders. There was an understandable lack of detail given the upcoming Budget, but over the coming weeks the government is going to have to set out more of its business plan if it’s serious about achieving the highest sustained growth in the G7.
The UK is in an international competition to attract institutional investment. Whether from domestic or foreign investors, there are a multitude of factors which determine where that capital is allocated. The UK is in a strong position, with well-respected institutions. The economy is slowly ticking up. Interest rates may be heading down. The newly elected government has a very large majority and is focused on growth.
However, productivity – a key driver of sustained economic growth and rising living standards – remains consistently low. Compared to other G7 nations, the UK is less productive per hour worked than France (eight per cent less), Germany (12 per cent less) and the US (20 per cent less). If the UK is to attract investment across the country then we need to understand the underlying factors which are holding back the economy.
Last week the Building Back Britain Commission published new analysis, combining thousands of pieces of official data which highlight the ‘productivity potential’ of every local authority in England. The research allocated a score to each local authority based on access to healthcare services, the state of their local public transport links, the ability of people to live in a good quality, affordable home close to their place of work and the quality of their digital connectivity – factors which all contribute to a place’s productivity potential.
The report highlights the huge potential that exists to drive growth quickly. If you could raise the productivity levels of 146 local authorities by just one per cent, the research found that we could unlock as much as £16bn of economic value every year.
This means that by adopting a granular, place-based approach to identifying barriers to growth, the government can empower local leaders and businesses to fix those problems. That might mean allocating more expertise in local government planning departments, as we have previously called for. It could mean better targeting of public investment in local health and educational services alongside more housing. Getting to grips with these fundamental issues will almost certainly lead to more investment right across the country.
From my own perspective, the company I lead, Pension Insurance Corporation (PIC), which has invested more than £13bn in UK infrastructure to date, is keen to invest billions of pounds more in sectors like social and affordable housing, renewable energy and urban regeneration projects in order to provide the cashflows we need to pay our policyholders’ pensions over coming decades. The issue is not a shortage of capital to be invested in our country – the fact is there simply aren’t enough viable projects to invest in. To really help increase national productivity and help local communities thrive, this has to change.
What do we need? Clearer coordination and accountability between government and regulators is a must, as well as a streamlining of the processes that are currently holding back projects. The failure to build a single reservoir in over 30 years is a case in point – we actually provided the funding for the newest reservoir last year. There is also a strong case for further devolution of powers and funding for local leaders to help tackle barriers to productivity and social value creation in their local communities.
The case for investing in the UK is apparent. The Prime Minister and Chancellor have set out their opening statements. But more detail and more action is required at a local level to make sure the country can raise its productivity levels and become the number one place for investors and businesses to invest.
Tracy Blackwell is CEO at Pension Insurance Corporation
