I make no apology in returning to the subject of the rush of investment out of the London stock market for the second day running.
It is one of the biggest, yet most under-reported, challenges facing UK policy makers as they attempt to get the British economy moving again.
Today we report on our news pages that Coutts, a blue blooded bank with royal connections going back more than 300 years, is to drastically reduce its fund’s exposure to UK equities and bonds from around 20% to a typical 3% or 4%.
Coutts chief investment officer Fahad Kamal is refreshingly frank in his assessment, pointing out that the British market has not really moved on in 100 years, while the US exchanges are full of companies “not existing 20 years ago”.
A little harsh perhaps but there is something in it. But if the investment allocation logic is impeccable, the optics are terrible.
If a financial institution at the heart of the British establishment for centuries is giving up on UK equities what hope is there for turning around the disinvestment flood that is draining London?
As Charles Hall, head of research at investment bank Peel Hunt — which first spotted the change of investment strategy at Coutts — put it: “This is a large (£2 billion) transfer of assets from the UK to global funds, which reinforces the inexorable trend of outflows from the UK.”
Peel Hunt says it is “imperative” that the Government acts swiftly with pension reform, a bolder British ISA initiative, and the removal of stamp duty “to encourage UK investment in UK assets”. There is some evidence that the problem is at least on Jeremy Hunt’s radar, but little that the scale has been fully grasped.
The Coutts decision will not be the last. London should have a stock market the country can be proud of, attracting investment that can rev up the UK economy. It is not fulfilling that role.
