The City of London’s wish list for the new Labour government

“The government has a clear mandate to lead — which is good for stability and getting things done,” said Marco Amitrano, a senior partner at PwC UK. But he added that the government should have a “healthy dialogue” with businesses because “without care, significant measures can have unintended consequences.”

NatWest chief executive Paul Thwaite and Lloyds Banking Group boss Charlie Nunn were among those who welcomed Labour’s commitment to prioritising economic growth.

The financial services sector has a long wish list for the government and has structured some of its demands to align with Labour’s aim to boost the UK economy.

One area being closely watched in the City is Labour’s approach to regulation. The financial services sector came under the scrutiny of Rishi Sunak’s Conservative government after complaining about what he said was a stifling regulatory environment that was too focused on eliminating risk-taking.

Companies want to know “what’s going to be done in terms of a different approach to balancing risk,” Celic said.

Executive frustrations with regulation have reached a head in recent months as the industry clashed with the Financial Conduct Authority over the regulator’s plans to more frequently “name and shame” companies under investigation, even when they have not yet been found guilty of wrongdoing.

Peter Horrell, UK chairman of Fidelity International, said the pensions and savings market was an area that had become “distorted” to avoid risk.

“From an individual’s perspective, the focus on keeping things ‘safe’ is creating much greater risks,” he said. “Individuals are not investing enough in pensions, investments — such as shares — and benefiting from the long-term growth versus risk that these can provide.”

Labour has promised to create an office of regulatory innovation to “improve accountability and promote innovation in regulation”.

But it did not explain how this would work in practice – one of several areas, including the party’s wider industrial strategy, where Labour has set out its ambitions without explaining how it will achieve them.

“We’ve seen the prospectus,” Celic said. “How is the management team going to deliver it now?”

Former Chancellor of the Exchequer Jeremy Hunt has stepped down before completing a review of UK capital markets rules, including the so-called Edinburgh and Mansion House reforms.

The programme to shake up capital markets included changes to stock market listing rules and other measures to reverse the flow of companies and capital out of UK public markets.

Wealth managers and fund groups said Labour should focus on making domestic equities “attractive” to address low investor interest in the UK stock market.

“We need a government that is bold and imaginative” to tackle the “malaise” in UK capital markets, said Matthew Beesley, chief executive of Jupiter Fund Management.

Calls to encourage pension funds to invest in UK companies are likely to continue, as executives seek to reduce or abolish the 0.5% stamp duty on trading in shares of UK-listed companies, which raises around £3.8 billion ($7.9 billion) a year for the British Treasury.

Michael Summersgill, chief executive of investment website AJ Bell, said the regime meant “we are not giving ourselves the best possible opportunity here, we are charging a tax on our own stocks and shares”.

CS Venkatakrishnan, chief executive of Barclays, said: “Inspiring a culture of informed risk-taking in equities is essential to growing the next generation of UK technology companies and reinvigorating our public markets.”

Paul Geddes, chief executive of Evelyn Partners, added that making London more attractive would “not only increase domestic interest but also encourage overseas investors to increase flows into UK exchanges”.

Many in the sector also want Labour to promote closer ties with the European Union, but are cautious about making this point too loudly given the political sensitivities.

“Banks would like to see relations with Europe rebuilt so that mutual market access is improved and we can operate seamlessly across borders without inefficient duplication of costs,” said an executive at a London-based international bank.

The trillions of pounds managed by the UK pensions and insurance sectors will be a crucial part of any capital markets reform and Labour’s efforts to increase private investment in UK infrastructure.

The party has pledged in its manifesto to overhaul the UK’s pensions landscape and some executives hope it will be bolder than the Conservatives in trying to pressure industries to invest in British assets.

Hendrik du Toit, chief executive of asset manager Ninety One, said the UK stock market had been “destroyed” by defined benefit pension funds rejecting it as part of a de-risking drive over the past two decades.

Defined contribution funds were being prevented from taking risks for pensioners because of limits on the costs they can incur, he added. To address these issues, he said a review of regulation and “the promotion of the wealth management industry should be considered by the government”.

Some in the industry argue that making it easier for pension funds to invest in unlisted assets, such as infrastructure projects, could help boost not only the economy but also pension holders’ returns.

Industry insists it is ready to invest more to help the UK reach its net zero target, but that there is a lack of investable projects. Labour is seeking to address the issue by shaking up planning rules and creating a national wealth fund to help “attract” private capital into decarbonisation projects.

Andy Briggs, chief executive of FTSE 100 pensions group Phoenix, said it was “vital to give UK pension savers greater access to a wider range of investment opportunities”.

He also called for an increase in contributions under the UK’s auto-enrolment scheme because of many people’s underfunded pensions. Any increase would be politically sensitive as it would hit workers’ take-home pay, but Briggs said “inaction risks people being lulled into a false sense of security that saving at the statutory minimum will be enough”.

Reforms to Solvency II rules on how insurers can invest their capital are largely complete, but executives continue to push for more flexibility to invest in the UK’s long-term assets such as infrastructure. They called for more funding for planning authorities to speed up their decisions and binding targets for strategic infrastructure projects.

Insurers have also called for improved competitiveness, for example by reviving Conservative plans for a new regulatory regime to promote “captive” insurance businesses, used by large companies to self-insure risks.

Meanwhile, general insurers have warned against Labour’s promised crackdown on car insurance prices, insisting the market is highly competitive.

Labour has promised to publish a “roadmap” for corporate taxation, a move welcomed by business groups including TheCityUK and the CBI for the certainty it would offer companies.

But there is concern in some quarters about a planned crackdown on a tax “loophole” used by private equity executives to pay a lower rate of tax on the profits they make from successful deals. Labour is due to consult on the policy but has pledged to raise £565m a year by taxing “carried interest” as capital gains rather than income, which attracts a much higher rate.

“With an almost certain attack on how many in private equity are compensated … this could be just the beginning,” said Kevin Cummings, a partner and tax lawyer at McDermott Will and Emery, citing new rule changes and potential tax increases that would affect some wealthy clients.

Labour has promised to further tighten rules for “non-domiciled” individuals living in the UK and has not ruled out increasing the rate of capital gains tax, increasing the possibility that wealthy individuals will try to sell assets or leave the country.

The Financial Times