The Financial Conduct Authority (FCA) has been accused of stifling investment in the UK in an open letter to the government.
The UK Crowdfunding Association (UKCFA) claimed that, since 2021, the FCA has failed to meet its own target to reduce the number of people who hold surplus cash and have the capacity to take risk, yet do not invest in UK companies and funds.
It identified a baseline number of 8.6m individuals in that situation in 2021, from its comprehensive Financial Lives Survey.
The original target aimed to reduce this number by 20% to 6.9m by 2025, but instead the latest version of the survey has revealed an increase of 37% to 11.8m people (2023) with 44% of those individuals (5.2m) having the appetite for greater risk in their portfolio and currently not participating in any form of investment activity.
It is estimated this lack of participation by those with the appetite for risk and the money to do so represents a potential lost investment of £53bn – £165bn to UK Plc.
At the same time, the UKCFA said the FCA has failed to reduce the numbers of vulnerable investors who hold investments that are unsuitable for their risk appetite and capacity for loss.
As a result, it has written to the economic secretary to the Treasury, Tulip Siddiq, asking for an immediate independent review of the impact of “unprecedented changes” in regulation of crowdfunding and p2p lending.
The organisation said this has “severely constrained market capacity” in a vital sector of the UK business finance ecosystem.
It claims the UK is now viewed as having one of the most restrictive regimes for crowdfunding and p2p lending in the world and increasingly firms are looking overseas to source the capital they need to launch and grow innovative businesses.
UKCFA said the country now faces losing its leadership unless action is taken to assess the impact of numerous rule changes and restrictions that have made it increasingly difficult for platforms to recruit new investors.
UKCFA chair and director, Bruce Davis, said: “It is important that the rhetoric of regulation does not reduce investment markets to a lowest common denominator approach to risk.
“Private markets have an important role to play in both the growth of the economy and in the portfolios of investors.
“This data clearly shows that the increase in regulation is creating a paradox of thrift, which reduces the diversity and reach of capital markets at a time when the priority of the government is clearly to encourage growth that benefits every part of the UK.”
Please stop this nonsense about investing in UK funds. Firstly, most people already have plenty of exposure to the UK via their salaries, income, cash savings and the general economic situation. Diversity is still key when it comes to investing, so why have all your eggs in the UK basket? I am not advocating nil investment in the UK, just a modest percentage and then heavily weighted to those larger firms who earn a significant amount of their income from outside the UK. After all investing is firstly for profit, not to fulfil a political or social agenda.
To a large extent, I agree with you, mainly on the grounds that the capitalisation value of the UK stock market is a mere 3% of the global total (down from 5% just a couple of years ago), compared with that of the USA, which is 59% (nearly 20x greater).
It stands to reason therefore that the holdings of any equity investment portfolio that’s properly diversified globally should be (more or less) no more than 3% UK and 59% US. Yet hardly anyone seems to choose such weightings, even fund management teams, preferring (nearly) always to hold a much greater percentage in the UK. Is this the best strategy for investors?
So using that logic, due to their low exposure, someone from the US should have most their money invested in markets such as the UK?
There is an ongoing and bewildering increase of regulation with no attention being paid to rules already in place.
The FCA makes its own rules.In places the FCA handbook is irksome, difficult to understand and unmanageable for the hoi polloi.
They are not expected to read it until they don’t, when they are blamed.
There are instances where rules have been referred to clients as inviolable when, in fact, they were irrelevant.
Who can be bothered to read intricate rules after dodgy personal assurances of their sacrosanct status?
Folk go away to some other place, or country, instead.
The Chancellor of the Exchequer apparently climbed her greasy pole by repeatedly falsifying her CV.
That everybody fakes it was propounded in the Independent newspaper yesterday.
So it’s OK. The sludge seems to have license to cheat in its thrust to the top of UK high finance.