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
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- Raising SME investment requires shifting the focus of bank lending to small, high-growth firms.
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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.
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: •
•
using intellectual property as collateral •
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: •
pension trustees and extends it to asset managers, brokers and other institutions that act as shareholding intermediaries •
interpret their fiduciary duty and ensure that there is sufficient disclosure of information to monitor and enforce behaviour •
reduce short-term speculative trading •
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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:
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