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Policy Papers

Response to the PRA and FCA’s Secondary Objective on Growth and Competition

Dear Lord Forsyth, Committee Members, 28th November 2024

As a group of over 50 specialist investment managers, predominately based in the UK, we welcome the focus of this inquiry. Led by consultation with our members, we have several constructive ideas which could help embed the objective of international competitiveness and growth. Particularly as smaller and independent managers, we fear that progress towards this objective has thus far been limited. We are hopeful that the findings of this enquiry can help address this.
We strongly believe that small businesses, including small and specialist investment firms, are engines of growth. However, there are significant costs and complexities of starting an asset management business in the UK. We are often compared with our US counterparts who have much lower barriers to entry and hence entrepreneurial businesses can be born with greater ease. Enabling the development and scaling of small businesses should be part of the scope of the FCA’s secondary objective. Regulatory costs disproportionately impact smaller
firms, given their resource and capital constraints. These raise barriers to entry and discourage entrepreneurs (unless they have access to significant pools of capital, which has implications for diversity as well as growth and innovation in our industry). It also reduces investment choice and feeds the ever-growing challenge of consolidation in our industry. We therefore welcome moves towards regulatory rationalisation, as well as harmonisation with international standards. This must, of course, be done in ways compatible with the FCA’s objectives regarding consumer protection and market integrity. We see many ways in which they can be mutually reenforcing.