Britain has a risk problem and it’s stifling investment

On October 14, Sir Keir Starmer will host the UK International Investment Summit, a flagship event for a government out to show its commitment to growth and wealth creation. While many of these conferences can be glorified talking shops designed to add a bit of positive mood music, the stakes are high for this event. It will be a pivotal moment, one when the new government fires the starting gun on resetting an investment culture that, frankly, has withered on the vine over decades.

So far the actions of the government suggest a long-term strategy intended to tackle the problems it has identified to date. Whether or not you agree with Labour’s approach, it shows a (perhaps multi-parliament) wide-ranging perspective and a willingness to be bold and to take risks, all with a longer-term payoff profile in mind.

And this is the crucial point. Investing is about taking capital and putting it at risk with the hope and expectation that there will be a reward in due course. Naturally, there’s also the assumption that this will be superior to having done nothing at all. However, in Britain our investment culture has slowly but surely been eroded. Too often we do nothing rather than something.

It is everywhere in our society. There is a focus, bordering on obsession, with avoiding getting things wrong. The Labour Party’s “Ming vase” campaign strategy was a case in point. Criticised by some for its relative lack of ambition given its lead in the polls, party leaders concentrated on not making mistakes rather than articulating bold policy changes.

Here, as in other places, there is too much focus on avoiding what could go wrong rather than thinking what might go right. This mindset stymies the ability to take risks today for rewards tomorrow, which is at the heart of growth and wealth creation.

This behaviour is endemic in the country’s public markets, too. Here is an investor base that has not encouraged, welcomed or valued high-growth companies. Incentives for pension providers to derisk have a lot to answer for here, but they are not the only reason. There is a huge emphasis in Britain on cash returns to shareholders in the form of dividends. These are, of course, helpful and sometimes appropriate, but sometimes they can come at the expense of investing for growth.

The “safety first” culture is most prevalent and damaging when it comes to giving individuals an incentive to invest their own money. According to Hargreaves Lansdown, the investment platform, almost two thirds of people in the United States have invested in the stock market, whereas in Britain less than a quarter have done so.

If our government is serious about wealth creation, it must educate individuals about investing and should encourage them to do so. Ideally, they will be moved to invest in UK plc or if not, simply to recognise the benefits of investing cash that otherwise would generate small (probably sub-inflation) returns in productive, growing assets. This not only creates wealth but also a capital pool for the businesses of tomorrow, which, in turn, supports a strong jobs market.

The government needs to start at the ground floor. It should prioritise building financial literacy into secondary education programmes. But this, by itself, will not be enough. For the investment summit to fulfil its potential, to be a true reset moment for our relationship with investing and healthy risk-taking, Labour should use it as a public launchpad for key proposals that have been tabled by the financial industry, namely the introduction of a British Isa, tax breaks for long-term pension assets and the abolition of stamp duty for UK shares. If the new government implements any or, ideally, all of these, it will signal a desire to rebuild an investment culture where risk is tolerated and, indeed, encouraged, for the benefit of long-term returns.

Matthew Beesley is chief executive of Jupiter Asset Management