The national wealth fund was a Labour manifesto pledge that was swiftly confirmed by the new government following its election.
Five days after voters went to the polls, the government announced it had instructed officials to immediately begin work on aligning the UK Infrastructure Bank and the British Business Bank under the fund.
On the same day, the National Wealth Fund Taskforce, established while the chancellor was a member of the shadow cabinet, published its report setting out design principles, alongside recommendations for the fund.
Taskforce chair Rhian-Mari Thomas, who is also chief executive of the Green Finance Institute, said: “The Taskforce recommendations set out how a combination of catalytic capital, deployed in partnership with a government delivering policy certainty, can make the UK the destination of choice for global investment.”
So what has been holding the UK back from being that destination of choice?
“From the feedback from taskforce members and the engagement we did with the market, at least a couple of things came across really strongly,” says Simon Horner, managing director, external affairs at the Green Finance Institute.
“One was the need for longer-term policy clarity and certainty. Investors were keen to say that was as, if not more, important than the availability of catalytic capital for example, or the availability of public-private partnerships.
“And a corollary of that was where public capital is required, or where more risk-sharing opportunities are required, a simpler structure for private investors to engage with is needed. The description of our system was one that was relatively fragmented, and not particularly straightforward for private investors to engage with.
“If we look at what France is doing and what Germany has historically done in terms of building critical mass of public finance, giving investors more of a one-stop shop to dock into, so that they're clear what's available and what the pipeline of opportunities are, that was something that came across really strongly.”
So besides aligning the UKIB and BBB under the fund, background briefing notes on the King’s Speech introduce a NWF bill to put the fund on “permanent statutory footing”.
Indeed, conviction and stability of policy development is critical to attract investors to UK markets, says Rebecca Craddock-Taylor, director of sustainable investment at Gresham House, an alternative asset manager.
“The previous UK government was inconsistent in its policy implementation, which left investors with uncertainty that made the UK a riskier investment proposition.
“The NWF removes this uncertainty and provides private investors with security that the UK government is a reliable partner in UK infrastructure investment. It also provides private investors with an indication of the industries that will be a priority for the government over the long term.
“It also has the potential to move the UK from a reactive position where government funding is required at points of severe downturns or to secure rescue packages, into a country that proactively identifies the industries it wants to grow to support its long-term prosperity as well as providing the private sector with clear direction of which industries the UK government is committed to growing.”
