With almost half of the world’s population heading to the polls, including the UK, EU and US, this could be a pivotal year of change across the globe. Political, economic and security uncertainty continues, with businesses and households across Europe facing significant headwinds. In this tougher environment, the UK investment management industry, which looks after €7.9trn for citizens in the UK and Europe, is likely to play an ever more important role in helping to deliver better financial outcomes and supporting the development of a modern, resilient and sustainable Europe.
Despite Brexit, the UK and the EU are inextricably linked and face similar challenges and opportunities. With economic performance sluggish, we expect politicians and policymakers to turn towards investors to help fund growth. Across Europe, we’ve seen a range of proposals, including a European Savings Fund, as well as national-level initiatives such as Germany exploring directing pension funds into local infrastructure.
There are also widespread concerns that households are not saving enough, particularly as governments increasingly expect citizens to make greater individual provision for retirement. Getting the EU retail investment strategy right could significantly boost participation through increased consumer confidence and access to investment products. But there is much more to do, and wider use of tools, such as pensions dashboards and auto-enrolment programmes, could play an important role in improving income in retirement.
Sustainable investment
The race to net zero is another topic which will feature in the upcoming elections, as politicians and policymakers grapple with how to meet the 2050 deadline. Sustainable finance is a key area for growth and investors will have an important role in supporting and financing the green transition. While the EU and UK have both established regulatory frameworks to promote sustainable investment, these are complex, partly reflecting the scale of the net zero challenge, partly reflecting often diverse investment and wider public policy preferences.
Underpinning all of this is a technological revolution, which is gathering pace and will have some dramatic impacts on financial services, as well as the wider economy and society. By developing innovative solutions, such as digital payment platforms, robo-advisors and blockchain applications, we can offer more tailored and cost-effective services. Technology can also help significantly improve risk management and fraud prevention. Innovation, however, requires a supportive policy and regulatory environment, and this is an area where business, government and regulators can work together.
Regardless of the outcome of the elections, the UK industry is ready to play its part, and retains a resolutely open-border mindset from both an investment and operational perspective. The relationship between Luxembourg and the United Kingdom is an excellent example of how the investment management industry can operate successfully at regional and global level to meet the needs of customers and deploy capital at scale.
We look forward to continuing the discussion with politicians, policymakers and regulators with the aim of making investing better for all.
Jonathan Lipkin spoke at the Association of the Luxembourg Fund Industry’s Global Asset Conference, 20 March 2024. This guest contribution first appeared in Delano’s print edition.
