London: Six asset managers will invest about 9 billion pounds ($14 billion) over the next five years in British firms, schools and roads following tax changes, a funds industry body said on Thursday.
Britain’s finance minister George Osborne announced on Wednesday a new exemption from withholding tax for interest on private placements — a form of long-term, non-bank debt financing for smaller firms and infrastructure projects.
The Investment Management Association (IMA) said on Thursday that Allianz Global Investors, Aviva, Friends Life, Legal and General, Prudential and Standard Life intended to make investments totalling around 9 billion pounds in private placements and other direct lending to UK companies.
“This measure, announced yesterday in the Autumn Statement, is a significant boost to the development of the UK private placement market, unlocking crucial capital for UK businesses,” IMA Chief Executive Daniel Godfrey said in a statement.
Osborne said the fund managers would attract investment to Britain and increase credit to companies.
“This also signals the potential beginnings of an enduring private placement market for the first time in the UK,” Osborne said in a statement.
The European Union’s financial services chief Jonathan Hill is due to announce plans for a capital markets union (CMU) that is expected to include initiatives to boost private placements in a bid to reduce the region’s reliance on banks for funds.
“Compared to the stability and depth of its U.S.
counterpart, the European private placement market remains in its infancy, so will need continued careful nurturing to achieve its full potential,” said Deborah Zurkow, chief investment officer for infrastructure debt at Allianz Global Investors.
Allianz said it would invest upwards of 3 billion pounds over the next three to five years in UK infrastructure, with 600 million pounds invested by the end of 2014.
European issuance of private placements in 2013 totalled 15 billion euros, compared with 45 billion euros in the United States, the Association for Financial Markets in Europe (AFME), a banking lobby, said in a study on Wednesday.
AFME urged Hill, who will launch a public consultation on the CMU project in early 2015, to expand the private placement sector by using standardised structures, practices and documentation.
