Regulatory uncertainty hits UK Investment

UK investment ‘hit by regulatory uncertainty’

One of Britain’s most successful investors says politicians’ lack of understanding is holding back key decisions

Louise Armitstead By Louise Armitstead8:30PM GMT 15 Dec 2013 CommentsComments

Politicians have a “worrying lack of understanding” about the dangers of interfering in key markets, one of Britain’s most successful investors has warned.

Richard Buxton, the fund manager who was poached from Schroders by Old Mutual, has said there is “massive regulatory uncertainty” hanging over some industries that desperately need investment.

Speaking for the first time since moving to Old Mutual, Mr Buxton said: “There is a complete lack of clarity about what the regulatory backdrop is going to be, what returns you’re going to be allowed to make in the UK.

“It’s a ludicrous thing to create this massive regulatory uncertainty, at a time when the country genuinely needs to attract billion of pounds to spend on infrastructure and keep the lights on. They wont be able to attract the investment they need with this threat.”

Mr Buxton argued that too often just a few words from a Government minister damages years of painstaking regulatory efforts. “With National Grid, for example, we have just been through a multi-year process of discussion and debate about a new eight-year regulatory framework so we have clear sight of the rules and regulations and returns,” he said.

“And in one speech [at the CBI conference] the Prime Minister can say, ‘well, maybe we will look at it again.’ So the risk premium of the company just goes up again.”

He added: “There’s a worrying lack of understanding by MPs on the sheer nuts and bolts of some markets and industries. At the moment they’ve just got a very fixed agenda about the election not the industries.”

He argued: “Usually by this stage in the political cycle, Governments start giving money to the electorate. But this time they don’t have any money to give so they are leaning on companies to give money to voters through cutting bills and threatening them with extra taxes.
It’s anti-shareholder and anti-profit. It’s dangerous, shareholders are investors and behind them are pensioners and savers. “

Mr Buxton said investors are concerned that political interference has “spread” from financial services to the energy sector and even housing. In his speech at the Labour Party conference, Ed Miliband pledge to freeze energy prices and tax housebuilders if they don’t build on their land banks.

“It’s moved on from banker bashing and issues on bank capital to energy and house builders,” he said.

During his 11 years at Schroders, Mr Buxton’s UK Alpha Plus fund generated 222pc returns. His resignation shocked the City and caused an outflow of funds from Schroders.

Since his move to Old Mutual was announced UK alpha funds have soared from just £160m to more than £1bn.

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