Finance | G Pontin

Budget 2016 – A budget for small business and savers

This year’s Budget is one that small companies should be excited about, the chancellor not only announced his intention to lower corporation tax to 17% by 2020 but also a raft of measures to shift support towards smaller businesses and savings.

Many will ask, why is such a shift important? SMEs make up a significant proportion of businesses and economic activity in the UK. The FSB estimate that small businesses accounted for 99.3% of all private sector businesses at the start of 2015. That is a lot of activity and economic potential that could be unlocked.

Whilst there have been some announcements that add costs of items such as the implementation of the National Living Wage, assistance to small companies during the transition until 2020 will help to relieve cash flow issues.

There were also new saving products in the budget with the launch of Help to Save and the lifetime ISA. These will be a welcome relief to individuals that have struggled to improve their financial position give the historically low interest rates.

Infrastructure was another potential beneficiary with the announcement of HS3, Crossrail 2, several road investments and extra funds for flood defences. Such investment is key to ensuring the economic potential of the UK in the future. Caution should, however, be urged. Whilst the commitment to these projects is sound progress the UK still struggles in the international rankings for its infrastructure and its investment levels are generally considered to be below where they need to be.

Below is a summary of the key announcements from the budget documents (click here)

Announcements

Permanently double Small Business Rate Relief from 50% to 100%.
Increase the threshold for the standard business rates multiplier to a rateable value of £51,000.
From April 2020, switch in the annual indexation of business rates from RPI to CPI
By 2022 local authority business rate systems will be linked to HMRC digital tax accounts
From April 2018, Class 2 NICs will be abolished
The government will reform Class 4 NICs
The introduction of two new £1,000 allowances for property and trading income.
From 6 April 2016, the higher rate of Capital Gains Tax (CGT) will be reduced from 28% to 20%, and the basic rate will be reduced from 18% to 10%.
A restriction of the amount of profit (in excess of £5m) that can be offset through losses carried forward.
Abolish the CRC energy efficiency scheme following the 2018-19 compliance year
The reform of stamp duty on commercial property
Increase the VAT registration threshold in line with inflation to £83,000 from 1 April 2016
A further £3.5bn of savings from public spending in 2019-20
Around £1.5bn investment in areas such as housing, schools and transport over the next three years
Increasing the personal allowance from £11,000 in 2016-17 to £11,500 in 2017-18
Increase the higher rate threshold by £2,000 to £45,000 in 2017-18
The devolution of power to school leaders, expecting all schools to become academies by 2020
Create a National Funding Formula for schools from 2017-18.
Invest £20 million a year of new funding in a Northern Powerhouse Schools.
A new soft drinks industry levy targeted at producers and importers of soft drinks that contain added sugar.
The ISA allowance will rise from £15,240 to £20,000 in April 2017
From 6 April 2017 any adult under 40 will be able to open a new Lifetime ISA. They can save up to £4,000 each year and will receive a 25% bonus from the government on every pound they put in
A new Help to Save scheme for those on low incomes
Increase the existing £150 Income Tax and National Insurance relief for employer arranged pension advice to £500
The delivery of 13,000 affordable homes by bringing forward £250 million of capital spending
Move to a more zonal and ‘red line’ planning approach
The new mandatory National Living Wage (NLW) will come into effect from 1 April 2016, set at £7.20 an hour for workers aged 25 and above.
The main rate of the NMW, which applies for workers aged between 21 and 24, at £6.95 from October 2016
An individual lifetime limit of £100,000 on gains eligible for Capital Gains Tax (CGT) exemption through Employee Shareholder Status
£300 million of funding to improve northern transport connectivity and is giving the green light to High Speed 3
The green light to Crossrail 2, supported by £80 million to help fund development
Deliver a 5G strategy in 2017
Launch of the second Roads Investment Strategy, which will determine the investment plans for the period from 2020-21 to 2024-25
Allocate a £50 million Pothole Action Fund for England in 2016-17
Boost spending on flood defence and resilience by over £700 million by 2020-21
£50 million for innovation in energy storage
Auction Contracts for Difference of up to £730 million this Parliament
Establish a new Broadband Investment Fund
Commit to the 750MHz public sector spectrum in bands under 10GHz being made available by 2022
New devolution deals with the West of England, East Anglia, and Greater Lincolnshire

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Comprehensive Spending Review – summary

Today the Chancellor outlined in the Autumn Statement and Comprehensive Spending Review (CSR) projections for government expenditure in the next five years.

The biggest surprise announcement was that the proposed changes to the tax credit regime which were rejected by the House of Lords were scrapped in their entirety. Whilst this will be of great relief to many individuals the statement generally continued the recent trend of a reduction in governments share of activity within the economy.

It is important to understand the context and scale of the challenge the UK continues to face. The CSR document reveals that GDP growth is expected to be broadly consistent across the forecast period (up to 2020-2021) at around 2.4%.

Within the main components of GDP business investment is considered to increase significantly in the next few years, but items such as household consumption are expected to slowly cool over the period. There is also an interesting period in 2018 when general government investment shrinks by 1.6% on the previous year.
These figures are presented against a backdrop of the unemployment rate of just over 5% and inflation returning to the target rate of 2.0% by 2019. Public sector net borrowing in 2015-16 is expected to be 73.5bn falling to £4.6bn in 20187-19 before entering surplus. This results in government debt falling to 71.3% by 2020-21.

To put this in context central government gross debt interest will be £56.6bn in 2020-21 and therefore is bigger than all departmental Capital Budgets (Capital DEL) combined. This demonstrates not only the scale and cost of public sector debt but also highlights the importance of the government being able to finance such debt at a low cost.

A selection of announcements from the Autumn Statement (click here) are listed below:

International and defence

Funding of the Strategic Defence and Security Review in full.
Protects police spending in real terms over the Spending Review period.
Commits to meeting the NATO investment pledge to spend 2% of GDP on defence.
An additional £3.5bn to a Joint Security Fund to 2021 to increase spending on the military and intelligence agencies.
Invests £1.9bn in cyber security and £3.4bn in new counter terrorism activity.
Continue to spend 0.7% of national income on overseas aid.
Invest £290m in the BBC World Service.
Creates a new £1.3bn Prosperity Fund to assist the growth of emerging and developing economies.

Devolution

Significantly reduce the central government grant to local authorities.
Introduce a new council tax precept for social care.
Undertake the full devolution of business rates.
A real-terms increases to Northern Ireland Executive capital budgets.
A real-terms increases to Scottish Government capital budgets.
Consult on updating the Transparency Code to require all local authorities to record details.of their land and property assets in a consistent way.
Work towards further devolution deals with other major city regions.
Deliver a £12bn Local Growth Fund between 2015-16 and 2020-21.
Creating 26 new Enterprise Zones, including expanding 8 Zones on the current programme.
Spend £13bn on transport in the North over this Parliament.
Develop a longterm transport strategy for the region through the creation of a new Midlands Connect Strategic Board.

Health

The ringfence on public health spending will be maintained in 2016-17 and 2017-18.
Provide the NHS in England £10bn per year more in real terms by 2020-21 than in 2014-15.
Invest up to £300m a year by 2020 to fund new diagnostic equipment and additional staff capacity for cancer treatment.
Invest an additional £600m in mental health services.
Invest £10m in expanding the Healthcare Innovation Test Bed programme.
The creation of a social care precept to give local authorities who are responsible for social care the ability to raise new funding. This will work by giving local authorities the flexibility to raise council tax in their area by up to 2% above the existing threshold.

Pensions

Increase the basic State Pension to £119.30 a week.
The government will publish today its guidance for pooling Local Government Pension Scheme Fund assets into up to 6 British Wealth Funds, containing at least £25bn of Scheme assets each. This would enable them to improve investment into projects such as infrastructure.

Education

Protect schools funding in England in real terms over the Spending Review period.
The development of new loans for further and higher education, with almost £1bn expected to be lent by 2020-21.
The Spending Review reforms the funding system for health students by replacing grants with student loans and abolishing the cap on the number of student places for nursing, midwifery and allied health subjects.
Provide investment of over £1.3bn up to 2019-20 to attract new teachers into the profession, particularly into Science, Technology, Engineering and Mathematics (STEM) subjects.
The apprenticeship levy on larger employers will be introduced in April 2017 at a rate of 0.5% of an employer’s paybill. Each employer will receive an allowance of £15,000 to offset against their levy payment.
The government will establish a new employer-led body to set apprenticeship standards and ensure quality.
The government will create 5 National Colleges and will support a new network of Institutes of Technology across the country.
The government will lift the age cap on new loans to postgraduates from 2016-17 so they are available to all those under 60.

Energy

Over the CSR period the government intends on reducing the projected cost of green policies on the average annual household energy bill by £30 from 2017.
The extension of the Warm Home Discount to 2020-21 at current levels of £320m a year, rising with inflation.

Science

Protect the £4.7bn science budget in real terms.
A new Global Challenges research fund of £1.5bn over the next 5 years.
The government will subject to legislation introduce a new body – Research UK – which will work across the seven Research Councils.
Over £130m capital will be invested in Department for Environment, Food and Rural Affairs’ (DEFRA) science facilities.
The British Business Bank (BIB) will retain the £400m of additional funding for Enterprise Capital Funds that was announced at Autumn Statement 2014

Technology

Invest £1.8bn to digitally transform government services.
Invest nearly £1bn in the next generation of 4G communications network for the Emergency Services.
Invest £1.3bn to transform HMRC into one of the most digitally advanced tax administrations in the world, with access to digital tax accounts for all small businesses and individuals by 2016-17.
Consult on options to simplify the payment of taxes.
A new target to reduce the costs to business of tax administration by £400m.

Housing

The CSR caps the amount of rent that Housing Benefit will cover in the social sector to the relevant Local Housing Allowance.
limit Housing Benefit and Pension Credit payments to 4 weeks for claimants who are outside Great Britain, from April 2016.
Deliver 400,000 affordable housing starts by 2020-21.
200,000 Starter Homes which will be sold at a 20% discount compared to market value to young first time buyers, with a £2.3bn fund.
135,000 Help to Buy: Shared Ownership homes.
10,000 homes that will allow a tenant to save for a deposit while they rent.
At least 8,000 specialist homes for older people and people with disabilities.
Further reforms to the planning system, including establishing a new delivery test on local authorities, to ensure delivery against the number of homes set out in Local Plans.
Release public sector land with capacity for 160,000 homes.
Amending planning policy to support small sites, extending the £1bn Builders’ Finance Fund to 2020-21.
£2.3bn in loans to help regenerate large council estates and invest in infrastructure needed for major housing developments.
Invest £310m to deliver the first new garden city in nearly 100 years, at Ebbsfleet.
Extend the Help to Buy: Equity Loan scheme to 2021.
Higher rates of Stamp Duty Land Tax will be charged on purchases of additional residential properties with effect from 1 April 2016. The higher rates will be 3 percentage points above the current rates.

Procurement

Help forces to improve police efficiency by taking steps to drive down the cost of police procurement by up to £350m and encouraging greater collaboration.

Welfare

A real terms increase in spending on Access to Work, providing specialist IT equipment, or support workers.

Motoring

Introduce measures to end the right to cash compensation for minor whiplash injuries, and will consult on the details in the New Year.

Equality and childcare

A new £15m annual fund equivalent to the VAT raised each year on sanitary products will support women’s charities.
Doubling the free childcare entitlement from 15 hours to 30 hours a week for working families with three and four year olds from September 2017, there is, however, an upper income limit per parent of £100,000 and a minimum weekly income level per parent equivalent to 16 hours.
From 2017-18 will invest £300m to increase the average hourly rate childcare providers receive.
Provide at least £50m of capital funding to create additional places in nurseries.
Maintain in cash terms the Department for Education’s central children’s services budget.
Funding for universal infant free school meals will also be maintained.
The government will introduce the first ever national funding formula for schools, high needs and early years, so that funding is transparently and fairly linked to children’s needs. The government will launch a detailed consultation in 2016 and implement the new formulae from 2017-18.

Infrastructure

The government will publish a National Infrastructure Delivery Plan next spring, setting out in detail how it will deliver key projects and programmes over the next 5 years.
The government has increased its overall capital departmental investment plans by £12bn between 2016-17 and 2020-21.
The government will increase funding for the Renewable Heat Incentive to £1.15bn by 2020-21.
A second Roads Investment Strategy will be published before the end of this Parliament.
£250m to tackle the potholes.
Freeze regulated rail fares at no more than inflation (RPI) for the entire Parliament.
A £475m fund to which local areas can bid for money to pay for large local transport projects.
The government will commit up to 10% of shale gas tax revenues to a Shale Wealth Fund.
£250m for an ambitious nuclear research and development programme.
Allow Network Rail to sell assets and re-invest proceeds in rail infrastructure.
Privatise the Green Investment Bank with a sale expected to be concluded during 2016-17.

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ACE – Electricity Market Reform: Generating Results

Tariff costs, tariff types, and switching levels

Tariff rises continue to be of concern with the average dual fuel household bill rising from £1,057 in 2011 to £1,232 in 2012. These rises have been against a backdrop of low wage rate growth, employment uncertainty, and a general lack in consumer confidence, fuelling affordability concerns.

This report finds no evidence of regional pricing by the ‘big six’ companies, however, when analysing the differences between tariffs, it is found that the benefits of switching are relatively limited over time, with direct debit customers being the main beneficiaries. Looking at the rationale behind price changes, this report finds that the price reductions felt by consumers for direct debit tariffs are as a result of company’s pricing policies and not simply inflationary changes.

Energy trading, liquidity and self-supply

This report finds that over time there has been a shift towards short term, ‘spot’ trading with increased volatility and cost owing to the higher price that can be demanded on a short term transaction. These costs have then been passed onto consumers with little explanation from the energy companies or the regulator as to why increases in this kind of activity have been allowed to occur. Policy makers can no longer ignore such a shift, given the implications this has for affordability. As such, intervention is required to encourage more competitive, longer term trading on an open and transparent market.

There is also an increasingly vague view as to what the energy mix in the UK will be, creating uncertainty and holding back the investment the country needs. Whilst in theory, with the government remaining technologically neutral, competition should be encouraged. In reality it has created a situation where only the most certain of projects (those with the lowest financial, political and planning risk) progress, with all others prevented from progressing while investors continue to seek the right signals.

Consolidated Segmental Statements

This report analyses in detail the Consolidated Segmental Statements of energy companies and finds that the costs and earnings of the generation arms of companies varies more significantly than that of their energy companies supply businesses.

Economies of scale and efficiency are generally cited in favour of vertical integration in the energy sector, yet the analysis in this report calls into question whether the actual benefit is passed through the system to the consumer.

In some circumstances the results even suggest that costs move in opposite directions for the different divisions of energy companies (e.g. generation and retail/supply), demonstrating that pricing signals are not efficient and the system is not responding to them as would be expected. Part of the reason behind this may be that companies are responding to media pressures and attempting to control costs at one end of the system. This, however, fundamentally undermines price and investment signals within the market.

The analysis also calculates the ‘earnings’ premium that is applied as prices pass through the system. That is to say that if generators charge more to suppliers, suppliers in turn charge more to consumers. For every extra £1 a generator earns in profit, a supplier is also able to make an extra £0.57p, making a total increase for consumers of £1.57. Given that more than ‘base’ costs are passed onto consumers the case for vertical integration and the efficiencies it brings within the market appears uncertain.

The correlation between generators’ and suppliers’ weighted average costs shows that as the former’s average costs increase the latter’s average costs do not change significantly. This suggests two possible scenarios, the first being that the average weighted cost of generators has no bearing on suppliers’ average costs. Alternatively, supply businesses are able to hedge prices forward so effectively that they can absorb variations in generators weighted costs with little effect on their own. The second scenario is, however, questionable given the shift towards short term spot trading where it is more difficult to offset cost volatility.

International price comparisons and the effect of energy taxation

The UK is more or less exactly matching the IEA median for electricity prices, and has one of the lowest incidences of taxation on energy. As such, overall electricity prices in the UK may not be as overpriced as is feared. It also potentially indicates, that the UK is not proactive enough in reallocating resources from markets which are inefficiently accounting for the effects of climate change, pollution, and volatile prices, thus preventing movement towards a more stable and sustainable long term solution.

This report also compared the effects of taxation on the price of electricity and found that on average for every 1p increase per kWh in electricity taxes that occurs, there is also an increase of 0.53p in the electricity price. It should be noted, however, that this performance is significantly helped by Denmark, The Netherlands and Germany, where tax increases result in falls in electricity prices.
This compares with a rise of 7.4p per kWh in electricity prices for every 1p per kWh of extra taxes the UK government levies. This is also significantly more than any other country in the data sample below, with the next on the list (Ireland) experiencing an additional 4.3p per kWh rise for every extra 1p per kWh of taxation. The reason behind the UK’s poor performance in this area is likely to be that companies are ‘over insulating’ themselves against tax and policy changes, highlighting that long term policy certainty is key.

The evidence suggests that as the level of tax increases, so more investment takes place, the level and pace of research and development speeds up, and there is a lowering of long term costs, reducing the effect on electricity bills above and beyond the incidence of the tax.

The price of electricity in the UK on the ‘open’ market, i.e. not including tax, is one of the highest amongst the countries analysed. This is likely to be due to a lack of strategic planning as no one company considers investment in the UK as a whole at the macroeconomic level. As such, any investment outcome from the sector will favour individual companies’ investment strategies and not one that is efficient for the UK as a whole.

Policy – competition, EMR, CfD, capacity, price and consumers

This report suggests a way forward which attempts to balance the needs identified within the EMR framework, including:
The need for a policy which will secure a reasonable baseload and invest in solutions which can ‘store’ energy.
The need to address capacity issues without radically reforming policy again and therefore increasingly delay and uncertainty which is a major problem for investors.
Ways to improve and implement effective competition in the generation market by creating a secure base that lowers costs and allows technologies to compete where appropriate.
The need for increased transparency within the market, allowing the retail side to access and buy from a number of sources.

This report proposes that five Generation Investment Vehicles (GIVs) with a combined value of £8bn are created to ensure that in the short to medium term project finance is secured. In order to secure medium to long term investment to ‘lock’ long term cleaner energy into the UK’s generation system, this report also proposes that three Tidal GIVs (TGIVs) with a combined value of £21bn be created.

These vehicles could be used to finance for any type and combination of projects, for example:
Six CCGT plants at an approximate cost of £3bn (providing approx. 7,500MW).
Eight waste to energy plants at an approximate cost of £4bn (providing approx. 575MW).
£21bn of funds towards the building of tidal/lagoon assets (providing approx. 2,000MW to 3,000MW).
A £1bn fund for community projects, where money would be raised via crowd sourced funding.

The three £7bn TGIVs for example could finance:
The roll out of either smaller tidal schemes or more economically the construction of a Severn Barrage (with a target price of 16% below the current £25bn estimated cost) to lock in lower cost long term electricity not only for this generation but also the next few.

Introducing a secure supply has to be accompanied by increased transparency and ultimately improved competition within that part of the market where competition for variable electricity demand takes place.

This paper proposes a Priority Auction Mechanism (PAM) where:
A new structure of two open market traded exchanges where government has to purchase 50% of the capacity put forward in the first round, 75% in the second round, and all remaining capacity then having to compete OTC.
The first round of purchasing will be on contracts longer than 24 months, while the second will see providers enjoy contracts of longer than 12 months’ duration. This will have the dual impact of providing certainty of revenue for generators and encourage future investment whilst also encouraging a transparent and efficient pricing mechanism for the electricity market.

Company website:
http://www.acenet.co.uk/

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Business Innovate – Budget 2014 – Innovation, before big announcements

Whilst the 2014 Budget was unlikely to be one of significant spending given the fiscal constraints that continue to challenge government, it did provide a backdrop of significant innovation in several policy areas which has not been seen for a number of years.

The most significant of these innovations was in the area of pensions and savings. The UK has for a long time struggled to encourage individuals to think of their long term needs, with policies built up over a number of years being bolted on to an ever more complex system.

The 2014 Budget looks to be taking some significant shifts in these areas. On pensions the Chancellor announced that from April 2015, the government will change the tax rules to allow people to access their defined contribution pension savings as they wish from the point of retirement. If a significant number of individuals choose such action this would be a significant step away from the current system of having to purchase an annuity and could lead to some interesting market innovations in terms of providing incomes for retirement.

Another area of innovation surrounded encouraging saving, with the launch of the New ISA (NISA). This NISA will not only see its limit raised to £15,000 but will also allow individuals to transfer the amount they invest in cash and shares, removing the set restriction for each area. Another possibly more important innovation is that ISA eligibility will be extended to peer-to-peer loans, and all restrictions around the maturity dates of securities held within ISAs will be removed. Again this could provide a number of new investment opportunities that provide better rates and direct savings into small businesses through platforms in the peer to peer lending market.

As well as encouraging individuals to save the Budget 2014 announced the doubling of the annual investment allowance (AIA) to £500,000 from April 2014 until the end of 2015. This will be a significant benefit to businesses wishing to invest and will mean that the scheme will cover 4.9 million firms (99.8% of businesses), providing 100% up-front relief on their qualifying investment in plant and machinery.

Further to this the government also announced it will raise the rate of the R&D tax credit payable to loss making small and medium sized companies from 11% to 14.5% from April 2014, providing valuable support as the economy continues to improve.

Looking forward, there is another interesting announcement for small business in the budget that the British Business Bank will issue a request for proposals to implement an innovative wholesale guarantees programme alongside the Budget. Such a scheme could provide significant support for businesses and provide targeted assistance in the future, and so Business Innovate looks forward to engaging with government on this further in the future.

Whilst supporting small business is welcome, opening up opportunities is important as it allows companies to support themselves. The Budget announced an overhaul of UK Export Finance’s (UKEF) direct lending programme, doubling it to £3 billion and cutting interest rates to the lowest permitted levels. This scheme will mean that UK business will have access to one of the most competitive support schemes available for wining contracts in new markets, helping them to improve and expand overseas.

Go to: http://businessinnovate.co.uk/

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ACE – Funding roads – Reducing inefficiency and securing investment in roads for future generations

This report takes a macroeconomic approach to explore the potential inefficiency and loss of economic productivity as a result of the current condition of the road network.

This report considers a number of inefficiencies as part of this loss, with a total annual inefficiency of £12.2bn across England’s entire road network.

One of the concerns emphasised in this report is that this annual inefficiency adds up quickly over time, and given recent Government estimates that the number of hours each household will spend in traffic by 2040 will rise to 70 hours, with inefficiency on a path to reaching £27bn annually.

The government should be aiming to reduce inefficiency in the network, not mitigate a rise. As such this paper suggests two models which move the government and policy making towards stable investment mechanisms to ensure that the road network receives the maintenance and investment it requires.

These models are underpinned by the principle of a long term asset management approach to both the local and strategic network and they consider the risks that the private and public sector are able to bear under each scenario.

Company website:
http://www.acenet.co.uk/

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ACE – Revolutionising housing – Restoring the value of land: a new model for housing development

This paper is the second in ACE’s housing paper series and explores in detail the challenging conditions within the UK housing market.

Following the discovery of a £185bn housing gap and the disconnect between supply and demand in the housing market. This paper suggests an innovative model that attempts to address these challenges within the housing sector.

It proposes a Land Optimised Value Extraction (LOVE) model which is based around certainty and optimising the value which can be extracted from land by using principles such as a clear strategic direction, regulatory certainty and encouraging market competition.

This model therefore attempts to shift the emphasis and process of planning and development. This aims to reduce the burden throughout the system, reducing costs for parties involved, whilst also balancing the need for strategic housing development, commercial competition and local engagement.

Company website:
http://www.acenet.co.uk/

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ACE – The housing gap – The growing human cost of not building enough homes

This paper is the first in ACE’s housing paper series and explores in detail the conditions within the UK housing market.

It finds that there is a serious housing gap (where the number of households formed outstrips houses built) looming in the UK. The paper argues that unless the growing disconnect between supply and demand is tackled through major house building, the housing gap may prove potentially irrevocable. Such a failure to tackle this housing gap would have serious social and economic consequences for the UK.

The analysis in this report reveals that by 2021 the UK will have developed a housing gap of £185bn, the equivalent to 886,000 households, requiring housing to be built on the scale of a city twice the size of Birmingham. This additional gap on top of the already tight conditions in the housing market will if unchanged lead to a future where millions of people in the UK will be unable to afford to own a home.

This analysis highlights an urgent need for the housing gap to receive greater priority from government and all political parties, as well as the need for a new housing model to allow such increased house building to occur.

Company website:
http://www.acenet.co.uk/

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ACE – State Investment Bank

This paper is the final paper in ACE’s infrastructure investment series and explores in more detail the rational and practicalities of establishing a State Investment Bank.

Key areas explored in the paper:

A State Investment Bank could play an important role in long term economic policy
A State Investment Bank would help to stimulate housing supply
Given the importance of SME finance, it should remain separated from the task of investing in infrastructure.
State aid approval is required for a State Investment Bank
A State Investment Bank is not a one stop shop to fix for endemic investment problems
A State Investment Bank needs to make profit and invest returns.
Building a skills base for a State Investment Bank is vital
The change in financial regulatory landscape needs to be factored into a State Investment Banks design
The scale of capitalisation for a State Investment Bank is important
The banking levy could provide a significant degree of the capital for a State Investment Bank
A State Investment Bank requires a solid plan as to its capitalisation proces
Could the government scale down Royal Bank of Scotland (RBS) into a State Invsestment Bank?
A clear roadmap would be needed to scale up the GIB to a full State Investment Bank.

Company website:
http://www.acenet.co.uk/

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ACE – Green Investment Bank

This paper is the fifth in ACE’s infrastructure investment series and explores in more detail the current market conditions, challenges and rationale behind the Green Investment Bank. It concludes that whilst the Green Investment Bank is a step in the right direction, there are some issues which if left unchecked, could undermine confidence in its ability to facilitate green investment.

Key findings

The Green Investment Bank is a step in the right direction, but finance conditions continue to raise concerns about scale and speed of implementation
The GIB needs to improve transparency and information sharing for investment to take place
Perceptions surrounding the GIB and the subsidisation of green projects needs to evolve if investor confidence is to be gained
The current plan for granting the Green Investment Bank’s borrowing powers should be reinforced further
The GIB should continue to expand and identify other areas where it could facilitate investment

Company website:
http://www.acenet.co.uk/

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ACE – Pensions and infrastructure

This paper is the fourth in ACE’s infrastructure investment series and explores in more detail the current conditions within the market, and the implications they have on pension funds’ investment potential into infrastructure.

Key findings include:

The scale of the global pensions fund market holds great potential for investment
Government role is important given the challenge ahead
There is mutual benefit in pension fund investment into infrastructure
Infrastructure could help to improve pension funds’ funding status
The UK’s pension fund market is fragmented and so restricts the scale of investment required by infrastructure; opening this up could generate £6bn of investment
Culture and regulations within the UK need to change if significant investment is to take place
Tailoring products and investment to pension funds needs is essential
Expectations of returns and risk need to be realised by all parties
Pension funds are not the answer to all the UK’s investment requirements

Company website:
http://www.acenet.co.uk/

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