Pension investment rule changes would level-up regional science and technology investment by billions
By Bruntwood SciTech
Plans to relax fee limits and new rules to ease investment into long-term illiquid assets would generate a £5.26bn annual boost to UK science and technology investment by 2030
8,900 science and tech jobs would be created by 2025, and 20,500 by 2030 with an annual boost to the UK economy of £1.44bn
The North of England and Midlands would reap the biggest growth benefits relative to the size of their economies today
Life sciences and biotechnology would be the biggest winners
These are the key findings of the latest Market Spotlight report on the UK’s science and technology economy by Bruntwood SciTech, a joint venture between Bruntwood and Legal & General
Plans to exclude performance fees from workplace pension caps and recently launched changes to pension investment rules would unlock billions of pounds in additional investment, new jobs, and economic growth.
The findings, from the Market Spotlight report by Bruntwood SciTech, explored what the potential impact the relaxing of fee limits, which is currently being considered by the government, would be on pension fund investment into private equity and venture capital and, in turn, the science and tech sector.
It also forecasted the long-term impact of the recent introduction of a new investment asset class - the long term asset fund, or LTAF – to ease investment by pension funds and other professional asset managers into long-term illiquid assets.
The combined impact of LTAFs, which were introduced in November 2021, and the proposed fee cap exclusion, would unlock £3.19bn in additional annual investment into the UK’s science and technology sector by 2025 and create 8,900 new jobs in those industries.
By 2030, that figure would hit £5.26bn every year, alongside an annual boost to the UK economy of £1.44bn GVA and supporting a total of 20,500 new science and technology jobs.
The study found that this investment boom would have an outsized impact on the regional economies based outside of London and the South East of England, in a boost to the Government’s Levelling Up agenda.
Investment into science and tech businesses in the North of England and Midlands would total £818m per year by 2025 – including £330m in the North West - with £810m in London.
By the end of the decade, the economies of the North of England and Midlands would grow by a combined £487m every year, compared to £410m each year in London and £299m in the South East.
Of the 8,900 jobs the Spotlight report says could be created over the next three years, 1,200 of them would be in the North West of England, compared to 1,700 in London. In 2030, 25% of all new jobs created would be in the North of England compared to 17% in the capital.
In 2021, the North of England accounted for 430,000 jobs in the science and technology sectors, with 597,000 roles in London.
The report’s authors said that industries where R&D and patent approval is more capital intensive or lengthy, such as life sciences and biotechnology, will likely receive the greatest benefit from the removal of pension investment constraints.
The report predicts that the impact of the reforms would accelerate between 2025 and 2030 as now emerging sectors, like autonomous and electric vehicles and battery storage, naturally attract greater levels of investment.
Commenting on the findings, Chris Oglesby, Executive Chair at Bruntwood SciTech, said: “Our study provides powerful evidence in support of further pension investment reform as a means of rapidly accelerating domestic private equity and venture capital activity in the science and technology industries. This will unlock significant innovation, economic growth, and thousands of new jobs.
“Today, around 80% of investment into UK tech and life sciences comes from overseas, largely institutional sources and especially from North America and Asia. Inevitably, much of this capital is drawn to London. While global money is increasingly finding a home in the regions, boosting domestic investment is the fastest possible route to Levelling Up our knowledge economy.
“A private investment boom dovetails with the Government’s own efforts to address regional imbalances, such as spreading its own R&D spending more widely around the UK based on sectoral local strengths, and the £100m Innovation Accelerators in Glasgow, Greater Manchester and the West Midlands.
“With additional investment into the digital, transport and skills infrastructure of our places, especially regional cities, we can increase their capacity to absorb this new wave of private capital and cascade its benefits to their surrounding towns and neighbours.”
The research was conducted by Development Economics on behalf of Bruntwood SciTech – a joint venture between Legal & General and regional property company, Bruntwood.
A full copy of the report is available for download here.