Financing Investment Reforming finance markets for the long-term Alfie Stirling and Loren King ippr commission on Economic Justice


IPPR  |   Financing Investment Reforming finance markets for the long-term 34



Yüklə 0,84 Mb.
Pdf görüntüsü
səhifə6/6
tarix28.06.2020
ölçüsü0,84 Mb.
#32176
1   2   3   4   5   6
cej-finance-and-investment-discussion-paper-a4-report-17-07-21


IPPR  | 

 Financing Investment Reforming finance markets for the long-term



34

Conclusion and summary of proposals

Reforming financial markets is key to upgrading the UK to a high-investment, 

high-productivity and high-paying economy. Working alongside industrial 

policy, corporate governance reform and macroeconomic strategy, financial 

intermediation can shape both the supply of and the demand for investment. 

The market in bank loans and private equity investors governs the supply of 

capital to UK firms that can’t finance their investment needs internally. But the 

markets and institutions that handle and trade public and private equity also 

intermediate ownership in shares of more than half the private sector economy. 

This means that, as a system, they shape the priorities and incentives that 

eventually determine investment decisions across the UK’s largest businesses. 

Reform of our financial system should therefore be focused on improving the 

flow of capital to the businesses most in need of investment, and aligning the 

incentives between company directors and the long-term savers who, ultimately, 

own their shares. 

Raising SME investment requires shifting the focus of bank lending to small, 

high-growth firms. Banks’ current reliance on traditional property collateral for 

business lending means that horizontal interventions alone, such as the Funding 

for Lending Scheme, will not ensure finance reaches the places it is most needed 

to upgrade the economy. Instead, we propose that:

• 

the Bank of England should consider the case for raising the relative cost of 

real estate lending

• 

the Government should look at helping the private sector develop ways of 



using intellectual property as collateral

• 

the Government capitalises new specialist banks that can develop the 

expertise necessary to finance currently under-capitalised projects, both in 

particular sectors and in particular regions of the country. 



Aligning incentives in equity markets and promoting longer-term corporate 

investment requires changing incentive structures for the institutions and actors 

that intermediate share ownership. We propose that: 

• 

the Government strengthens the legal fiduciary principle that applies to 

pension trustees and extends it to asset managers, brokers and other 

institutions that act as shareholding intermediaries 

• 

a new Responsible Ownership Commission is established to help institutions 

interpret their fiduciary duty and ensure that there is sufficient disclosure of 

information to monitor and enforce behaviour 

• 

the Government scraps the ‘market maker’ relief on stamp duty reserve tax to 

reduce short-term speculative trading 

• 

the funds raised from this are used to introduce new reliefs in capital gains tax 



and corporation tax designed to incentivise longer-term ownership of shares. 

IPPR  | 

 Financing Investment Reforming finance markets for the long-term



35

References

Angelkort A and Stuwe A (2011) Basel III and SME financing, Friedrich-Ebert-Stiftung.  

http://library.fes.de/pdf-files/managerkreis/08528.pdf

Bahaj S, Foulis A and Pinter G (2016) The residential collateral channel discussion paper, 

Centre for Macroeconomics. http://www.centreformacroeconomics.ac.uk/Discussion-

Papers/2016/CFMDP2016-07-Paper.pdf

Bank of England (2016) Understanding and measuring finance for productive investment 

discussion paper. http://www.bankofengland.co.uk/financialstability/Documents/

fsdiscussionpaper/080416.pdf 

Bank of England (2017) 'Bankstats: Monetary & Financial Statistics (B1.4 and C1.2)' dataset. 

http://www.bankofengland.co.uk/statistics/Pages/bankstats/2017/may.aspx

Bank of International Settlement (2017) 'Data: Total credit to the non-financial sector' 

dataset. http://www.bis.org/statistics/totcredit.htm

Barnett A, Broadbent B, Chiu A, Franklin J and Miller H (2014) ‘Impaired capital reallocation 

and productivity’, National Institute Economic Review, 228(10). http://journals.sage 

pub.com/doi/pdf/10.1177/002795011422800104

Barney J, Ketchen D and Wright M (2011) The Future of Resource-Based Theory: Revitalization 

or Decline? http://journals.sagepub.com/doi/abs/10.1177/0149206310391805 

Barton D, Manyika J, Koller T, Palter R, Godsall J and Zoffer J (2017) Measuring the economic 



impact of short-termism discussion paper, Mckinsey Global Institute

Bazot G (2014) Financial Consumption and the Cost of Finance: Measuring Financial Efficiency 



in Europe (1950-2007). https://editorialexpress.com/cgi-bin/conference/download.

cgi?db_name=EEAMannheim2015&paper_id=471 

Bebchuk L and Fried J (2006) Pay Without Performance: the Unfulfilled Promise of Executive 

Compensation

Brassell M and King K (2013) Banking on IP? Intellectual Property Office. https://www.gov.uk/ 

government/uploads/system/uploads/attachment_data/file/312008/ipresearch-

bankingip.pdf

British Bankers' Association (BBAa) (2017) Bank Support for SMEs – 4th Quarter 2016. 

https://www.bba.org.uk/news/statistics/sme-statistics/bank-support-for-smes-4th-

quarter-2016/#.WU0S-DLyvcs

British Bankers’ Association (BBAb) (2017) Bank Support for SMEs – 1st Quarter 2017. 

https://www.bba.org.uk/news/statistics/sme-statistics/bank-support-for-smes-1st-

quarter-2017/#.WVuiCYjyu70

British Business Bank (BBB) (2017) Small Business Finance Markets Reports 2016/17.  

http://british-business-bank.co.uk/wp-content/uploads/2017/02/BBB-SBFM-REPORT-

2016-17-web.pdf

Burrows and Low (2015) ‘Mapping the UK financial system’, Quarterly Bulletin 2015 Q2, 

Bank of England. http://www.bankofengland.co.uk/publications/Documents/

quarterlybulletin/2015/q201.pdf 

Capelle-Blancard G and Havrylchyk (2013) ‘The Impact of the French Securities Transaction 

Tax on Market Liquidity and Volatilty’, La Lettre du Cepii, No. 331, March 2013

CFA Institute and Edelman (2013) Investor Trust Study: 2013

Cosh A and Hughes A (2008) Takeovers After Takeovers, Working Paper, No. 363, Centre for 

Business Research, University of Cambridge

Davis S, Lukomnik J and Pitt-Watson D (2016) What They Do With Your Money: How the 



Financial System Fails Us and How to Fix It, Yale

Deloitte (2014) Risk Appetite at New High, The Deloitte CFO Survey Q3 2014.  

https://www2.deloitte.com/uk/en/pages/finance/articles/deloitte-cfo-survey-2014-q3.

html


IPPR  | 

 Financing Investment Reforming finance markets for the long-term



36

Department of Business, Innovation and Skills (BIS) (2011) A vision for the Green Investment 



Bank. https://www.gov.uk/government/news/a-vision-for-the-green-investment-bank

Eatwell J (1997) ‘Effective demand and disguised unemployment’, in Michie J and Smith J 



Employment and economic performance: jobs, inflation, and growth, Oxford University 

Press, pp. 76–94, ISBN 9780198290933 

Eccles R, Ioannou I and Serafeim G (2011) The Impact of Corporate Sustainability on 

Organizational Processes and Performance, Harvard Business School

European Central Bank (ECB) (2017) 'MFI balance sheets', Statistical Data Warehouse

accessed 26 June 2017. http://sdw.ecb.europa.eu/reports.do?node=1000003152 

Fama E (1970) ‘Efficient Capital Markets: A Review of Theory and Empirical Work’, Journal of 



Finance 25 (2) 383–417. http://www.jstor.org/stable/2325486?origin=crossref&seq=1#fnd

tn-page_scan_tab_contents 

Franklin J, Rostom R and Thwaites G (2015) 'The banks that said no: banking relationships

credit supply and productivity in the United Kingdom', Bank of England Staff Working 



Paper No 557

Fulton M, Kahn B and Sharples C (2012) Sustainable Investing – Establishing Long-Term Value 



and Performance, Deutsche Bank Group

 

Gilson R and Gordon J (2013) ‘The Agency Costs of Agency Capitalism: Activist Investors and the 



Revaluation of Governance Rights’, Columbia Law Review ECGI – Law Working Paper 197

Goodridge P, Haskel J and Wallis G (2016) UK intangible investment and growth, Intellectual 

Property Office. https://www.gov.uk/government/uploads/system/uploads/

attachment_data/file/554480/Investment-in-Intangibles.pdf 

Graham J, Harvey C and Rajgopal S (2005), ‘The Economic Implications of Corporate Financial 

Reporting’, Journal of Accounting and Economics

Green Investment Bank (GIB) (2016) UK Green Investment Bank Annual Report 2015-16. 

http://www.greeninvestmentbank.com/media/118884/gib-annual-report-2016-web-

single-pages.pdf

Guyatt D and Lukomnik J (2010) ‘Does Portfolio Turnover Exceed Expectations?’, Rotman 



International Journal of Pension Management 3, 2

Haldane A and Davies R (2011) The short long. http://www.bankofengland.co.uk/archive/

Documents/historicpubs/speeches/2011/speech495.pdf 

Haldane A (2017) ‘Productivity puzzles’ speech at London School of Economics. http://

worldmanagementsurvey.org/wp-content/uploads/2017/03/boespeech_220317.pdf 

Haltiwanger J, Ron J, and Javier M (2013) ‘Who creates jobs? Small versus large versus 

young’, Review of Economics and Statistics 95.2. http://econweb.umd.edu/~haltiwan/

size_age_paper_R&R_Aug_16_2011.pdf 

Hatfield I (2017) Equitable equity: Increasing and diversifying finance for high-growth SMEs 

in the UK’s regions, IPPR. http://www.ippr.org/files/publications/pdf/equitable-equity_

Feb2017.pdf

Her Majesty’s Treasury (HMT) (2016) ‘Terms of reference for the Patient Capital Review’. 

https://www.gov.uk/government/publications/patient-capital-review/terms-of-

reference-for-the-patient-capital-review 

Huang J and Wang J, 2010, ‘Market Liquidity, Asset Prices, and Welfare’, Journal of Financial 



Economics, 95, 107–127

Hughes A and Singh A (1987) ‘Takeovers and the stock market’, Contributions to Political 



Economy 6, pp.73-85

Hyun Soo K (2014) ‘Economic Theories of Low-Wage Work’, Journal of Human Behavior in the 



Social Environment, 24:1, 61-70. http://socialwelfare.berkeley.edu/sites/default/files/

docs/kwon_economic_theories.pdf 

Investment Company Institute (2013) Investment Company Fact Book

Ipsos MORI (2017) 2016 Business Finance Survey: SMEs, British Business Bank.  

http://british-business-bank.co.uk/wp-content/uploads/2017/02/British-Business-

Bank-Business-Finance-Survey-2016.pdf

IRRC Institute and Organizational Capital Partners (2014) The Alignment Gap between 

Creating Value, Performance Measurement and Long-Term Incentive Design


IPPR  | 

 Financing Investment Reforming finance markets for the long-term



37

Jacobs M, Stirling A and Colebrook C (2016) Out of shape: Taking the pulse of the UK economy 

IPPR. http://www.ippr.org/publications/out-of-shape 

Kay J (2012) The Kay review of UK equity markets and long-term decision making (Final 

Report). https://www.google.co.uk/url?sa=t&rct=j&q=&esrc=s&source=web&cd=1&cad

=rja&uact=8&ved=0ahUKEwjqo-3QqNnTAhWDZ1AKHYL0CgoQFggnMAA&url=http%3A%2F

%2Fwww.ecgi.org%2Fconferences%2Feu_actionplan2013%2Fdocuments%2Fkay_review_

final_report.pdf&usg=AFQjCNFjXNdMIbaTCEfg69Me9Ku0K5b56w&sig2=guevt5uvHbGF0-

ud6_ESZA

Kay J (2015) Other People’s Money: The Real Business of Finance, Public Affairs

Keynes J (1936) The General Theory of Employment, Interest and Money, Macmillan

Law Commission (2014) Fiduciary Duties of Investment Intermediaries.  

http://www.lawcom.gov.uk/wp-content/uploads/2015/03/lc350_fiduciary_duties.pdf 

Lawrence M (2017) Corporate Governance Reform: Turning business towards long-term 



success, IPPR

Lazonick W (2014) ‘Profits without prosperity’, Harvard Business Review.  

https://hbr.org/2014/09/profits-without-prosperity 

Lazonick W and Tulum Ö (2011) ‘US biopharmaceutical finance and the sustainability of the 

biotech business model’, Research Policy40 9. http://www.sciencedirect.com/science/

article/pii/S0048733311001028 

Lovering J, King L and Nordhaus T (2017) How to make nuclear innovative: Lessons from other 

advanced industries, The Breakthrough Institute. https://thebreakthrough.org/images/

pdfs/How_to_Make_Nuclear_Innovative.pdf

LSE Growth Commission (2017) UK Growth: A New Chapter, LSE. http://www.lse.ac.uk/

researchAndExpertise/units/growthCommission/documents/pdf/2017LSEGCReport.pdf 

Mazzucato M (2016) ‘Innovation, the state and patient capital’ in Jacobs M and Mazzucato M

Rethinking Capitalism, Wiley-Blackwell. 

Mirrlees J, Adam S, Besley T, Blundell R, Bond S, Chote R, Gammie M, Johnson P, Myles G and 

Poterba J (2011) Tax by Design: The Mirrlees Review, Oxford University Press

Morningstar (2017) 2016 Global Asset Flows Report

Morris S and Shin H (2002) ‘Social Value of Public Information’, The American Economic 

Review 92 5, pp. 1521-1534. http://www.princeton.edu/~smorris/pdfs/Morris-

SocialValueofPublicInformation.pdf 

National Audit Office (NAO) (2013) Improving Access to Finance for Small and Medium-Sized 

Enterprises. https://www.nao.org.uk/wp-content/uploads/2013/10/10274-001-SMEs-

access-to-finance.pdf

Neild P (1964) ‘Replacement Policy’ National Institute Economic Review

New Economics Foundation (2015) Reforming RBS: Local banking for the public good. 

http://b.3cdn.net/nefoundation/141039750996d1298f_5km6y1sip.pdf

Office for Budget Responsibility (OBR) (2017) 'Public finance databank' dataset.  

http://budgetresponsibility.org.uk/data/

Office for National Statistics (ONS) (2015) 'Ownership of UK Quoted Shares' dataset: 

2014. https://www.ons.gov.uk/employmentandlabourmarket/peopleinwork/

employmentandemployeetypes/datasets/employmentbyindustryemp13

Office for National Statistics (ONS) (2016) 'Occupational Pension Schemes Survey, 

UK: 2015' datasets. https://www.ons.gov.uk/peoplepopulationandcommunity/

personalandhouseholdfinances/pensionssavingsandinvestments/bulletins/

occupationalpensionschemessurvey/2015

Office for National Statistics (ONS) (2017a) GDP(O) 'Low Level Aggregates' dataset. 

https://www.ons.gov.uk/economy/grossdomesticproductgdp/datasets/

ukgdpolowlevelaggregates 

Office for National Statistics (ONS) (2017b) 'EMP13: Employment by industry' 

dataset. https://www.ons.gov.uk/employmentandlabourmarket/peopleinwork/

employmentandemployeetypes/datasets/employmentbyindustryemp13

Office for National Statistics (ONS) (2017c) 'Gross Domestic Product at market prices: 

Current price: Seasonally adjusted £m' dataset. https://www.ons.gov.uk/economy/

grossdomesticproductgdp/timeseries/ybha/qna


IPPR  | 

 Financing Investment Reforming finance markets for the long-term



38

Organisation for Economic Co-operation and Development (OECD) (2013) 'Business R&D 

intensity adjusted for industrial structure, 2013' dataset, OECD Library data. http://

www.oecd-ilibrary.org/science-and-technology/oecd-science-technology-and-industry-

scoreboard-2015/business-r-amp-d-intensity-adjusted-for-industrial-structure-2013_

sti_scoreboard-2015-graph165-en 

Organisation for Economic Co-operation and Development (OECD) (2016) 'Value added by 

activity' dataset, OECD.stat.  

https://data.oecd.org/natincome/valueadded-by-activity.htm 

Organisation for Economic Co-operation and Development (OECD) (2017) 'Average annual 

wages' dataset, OECD.stat.  

https://stats.oecd.org/Index.aspx?DataSetCode=AV_AN_WAGE# 

Persaud A (2017) Improving Resilience, Increasing Value: The case for modernising the UK’s 

Stamp Duty on shares, Intelligence Capital. https://stampoutpoverty.org/wp-content/

uploads/2017/03/Improving-resilience-increasing-revenue.final_.pdf 

Philippon T (2014) Has the US financial industry become less efficient? On the theory and 

measurement of financial intermediation. http://pages.stern.nyu.edu/~tphilipp/papers/

Finance_Efficiency.pdf 

Price Water Coopers (PWC) (2012) PWC executive reward survey: Getting the balance of 

executive pay right.  https://www.pwc.co.uk/assets/pdf/getting-the-balance-of-

executive-pay-right-pwc-executive-reward-survey.pdf

Romano R (1992) A Guide to Takeovers: Theory, Evidence and Regulation, Yale Law School. 

http://digitalcommons.law.yale.edu/cgi/viewcontent.cgi?article=2991&context=fss_papers 

Saleheen J and Levina I (2017) The Financial System and Productive Investment: New Survey 

Evidence, Bank of England. http://www.bankofengland.co.uk/publications/Documents/

quarterlybulletin/2017/q1/q1pre.pdf

Seely A (2014) The Tobin Tax: recent developments, House of Commons Library. http://

researchbriefings.parliament.uk/ResearchBriefing/Summary/SN06184#fullreport 

Sirmon D, Hitt M and Ireland R (2007) 'Managing Firm Resources in Dynamic Environments to 

Create Value: Looking Inside the Black Box', Academy of Management Review 2007, Vol. 

32, No. 1, 273–292. https://www.researchgate.net/publication/228171417_Managing_Firm_

Resources_in_Dynamic_Environments_to_Create_Value_Looking_Inside_the_Black_Box

Terry S (2015) The Macro Impact of Short-Termism Job Market Paper, Stanford

The City UK (2016) Key Facts: About UK financial and related professional services.  

https://www.thecityuk.com/assets/2016/Reports-PDF/Key-facts-about-UK-financial-

and-related-professional-services-2016.pdf 

Tomorrow’s Company (2016) UK Business: What’s wrong? What’s next? Creating value for 

shareholders and society through a focus on purpose, values, relationships and the 

long term. http://tomorrowscompany.com/wp-content/uploads/2016/05/UKBusiness-

Whats-wrong-Whats-next.pdf 

Turner A (2010) The Future of Finance: The LSE Report, London School of Economics and 

Political Science (LSE)

Waygood S (2014) A Roadmap for Sustainable Capital Markets: How can the UN Sustainable 

Development Goals harness the global capital markets? An Aviva White Paper. https://

www.aviva.com/media/thought-leadership/roadmap-sustainable-capital-markets/ 

Wehinger G (2012) ‘Bank deleveraging, the move from bank to market-based financing, and 

SME financing’, OECD Journal: Financial Market Trends Volume 2012/1http://www.oecd.

org/finance/financial-markets/Bank_deleveraging-Wehinger.pdf 

Werner R (1997) ‘Towards a new monetary paradigm: a quantity theorem of disaggregated 

credit, with evidence from Japan’, Kedit und Kapital vol. 30, no. 2.  

https://eprints.soton.ac.uk/36569/1/KK_97_Disaggregated_Credit.pdf

World Bank (2016) 'Gross fixed capital formation (% GDP)' dataset. http://databank.

worldbank.org/data/reports.aspx?source=2&series=NE.GDI.FTOT.ZS&country 

World Federation of Exchanges (2013) Understanding High Frequency Trading.  

https://modernmarketsinitiative.org/wp-content/uploads/2013/10/WFE_

Understanding-HFT_May-2013.pdf


About IPPR

IPPR, the Institute for Public Policy Research, is the UK’s leading 

progressive thinktank. We are an independent charitable 

organisation with more than 40 staff members, paid interns and 

visiting fellows. Our main office is in London, with IPPR North, 

IPPR’s dedicated thinktank for the North of England, operating 

out of offices in Manchester and Newcastle, and IPPR Scotland, 

our dedicated thinktank for Scotland, based in Edinburgh.

Our purpose is to conduct and promote research into, and the 

education of the public in, the economic, social and political 

sciences, science and technology, the voluntary sector and social 

enterprise, public services, and industry and commerce.

IPPR 


4th Floor 

14 Buckingham Street 

London WC2N 6DF 

T: +44 (0)20 7470 6100 

E: info@ippr.org 

www.ippr.org  

Registered charity no: 800065 (England and Wales),  

SC046557 (Scotland).

The progressive policy think tank


Financing Investment

Reforming finance markets for the long-term

Discussion Paper

The IPPR Commission on Economic Justice is a landmark initiative to rethink 

economic policy for post-Brexit Britain. The Commission brings together leading 

figures from across society to examine the challenges facing the UK economy and 

make practical recommendations for reform. 

This discussion paper explores the reform of business finance markets. It argues 

that the UK’s weak investment performance stems in part from how – and in whose 

interests – British finance markets are configured. Drawing on a wide range of 

evidence, it argues that the financial sector is not serving the rest of the UK 

economy well. It shows how bank loans are skewed towards inter-bank credit, 

real-estate and traditional collateral, and how public equity markets fail to align 

the incentives of the UK’s largest companies with the savers who ultimately own 

their shares. The paper makes a series of recommendations on how investment can 

be raised, by improving the supply of patient capital to high-growth firms and 

changing the incentives for equity markets to act in the long-term good of 

companies, workers and savers.



IPPR Commission on Economic Justice

Yüklə 0,84 Mb.

Dostları ilə paylaş:
1   2   3   4   5   6




Verilənlər bazası müəlliflik hüququ ilə müdafiə olunur ©azkurs.org 2024
rəhbərliyinə müraciət

gir | qeydiyyatdan keç
    Ana səhifə


yükləyin