The Association of Investment Companies (AIC) has proposed the creation of government-sponsored investment companies to support economic growth in the UK and help deliver on the Labour government's objectives.

Its paper, Making people better off, outlined a series of proposals to support these aims, including the establishment of partnership funds.

Using the proposed National Wealth Fund as a ‘cornerstone investor’, the AIC suggested that the partnership funds could promote several objectives, including advancing the net-zero transition, boosting regional economic growth, and supporting new technology and innovation.

As their shares would be listed on the London Stock Exchange, the public would be able to invest in the funds, alongside the government and other investors.

The AIC noted that the government is aiming to increase investment in UK infrastructure and drive economic growth, and private capital was required due to the government’s fiscal constraints.

Its paper also made several other policy proposals, such as to stop taxing investors who buy British by abolishing stamp duty, at least on the shares of investment companies where the current rules penalise investors with double taxation.

Furthermore, the association called on the government to create an effective regulatory environment, including the reform of cost disclosures, and to support the provision of scale-up capital by considering options to enhance and extend the role of venture capital trusts.

“Investment companies in partnership with the National Wealth Fund could offer a new way for investors, from pension funds to individual ISA holders, to fund infrastructure projects, new technologies or the transition to net zero,” commented AIC chief executive, Richard Stone.

“All investors would be able to invest in these innovative projects which aim to drive the UK economy forward and create long-term wealth.

“Through the National Wealth Fund, the government could act as a cornerstone investor in each new investment company, alongside private and institutional investors, creating a unique combination of public and private capital.

“The fund could then sell down its holdings as the company became established, should it wish to do so, enabling the capital to be recycled into new projects.

“Investment companies provide a tried-and-tested way of overcoming the practical challenges of investing in infrastructure and new technologies. Their permanent capital structure removes the need to redeem investors’ units when they want to sell and therefore facilitates stable, long-term decision-making.

“As well as offering permanent capital, investment companies have independent governance and offer liquidity through the stock market – a combination of features that could be attractive to pension funds, other institutions and the general public, as well as to the government.”

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