How to turn the UK stock market crisis into opportunity – Alex Headley-Brown

FILE: A worker shelters from the rain under a Union Flag umbrella as he passes the London Stock Exchange in London, Britain, October 1, 2008. Reuters/Toby Melville
A punt for Hunt. How to turn the UK stock market crisis into the opportunity of a lifetime.

Recently Jermery Hunt announced that he was going to force pension funds in the UK to reveal how much of their fund is invested in U.K stock markets with the aim of shaming them into saving Britain’s floundering indexes. Insurance and pension funds in 1997 owned a combined ratio of 45.7pc of UK equities but today hold just 4.2pc according to the Office for National Statistics. This is the primary point of concern for the undervalued UK stocks markets as foreign investment has remained quite strong. 

But there is a huge opportunity here that the chancellor and others seem to be missing. In the US a Bloomsberg article touted the idea that the US government should produce a pension fund to save future generations from the looming crisis by investing $10,000 per child born in the US into the stock market, the logic being that based on an historic average return of 7.5% per year, that this single investment would be worth around $10 million dollars per person 70 years later when those beneficiaries would come to the age of retirement. This would be a God send for future governments, especially if the current global demographic tratractory holds true and we find ourselves with ever smaller cohorts of young people to subsidize the growing ranks of the elderly. 

It wouldn’t even be that expensive, in 2021 some 694,685 babies were born in the UK, if we gave £10,000 per child born here (more even than proposed under the American scheme) that would amount to just under £7 billion pounds a year, a tiny, less than 1pc sum of the national budget and less by the way than the £10 billion pounds it will cost the government to cut the national insurance by 2pc. A bargain when you consider the enormity of the problems it could solve.

One criticism of this policy idea would be that the dividend for implementing it would be too far into the future, therefore seeding doubts as to whether successive governments would continue such a policy, especially in times of tightening budgets. But saving a floundering London Stock Exchange answers the question of longevity with a major shorter term objective. 

Imagine if the government did now commit to bolstering the indexes to the tune of billions on a regular basis. Coupled with Jeremy Hunt’s pressure on the existing UK pension funds and indexes that are currently heavily undervalued this commitment of substantial continuous injections of cold hard cash could prove to be the making of the UK markets, proving a much needed boost for British companies to invest in themselves and Britain, not to mention protect them from foreign takeovers.

£7 billion might not be much when you consider the ftse 100 alone is valued north of £2 trillion but sometimes you don’t need to move the needle much in order to build momentum as strong signals of intent can produce disproportionate results. Besides, the government could always put down a larger initial sum that could bring that 70 year wait down a decade or two, or help fund a besieged future NHS. 

The extra money if needed could even be printed. I don’t approve of printing money, especially when inflation is stubbornly high, but small amounts put in the right places, at the right time for the right reasons could do wonders.      

I would imagine such a move could prove popular with voters too, who have been crying out for decades now for policies that have the long term interests of the country and its fine people at their heart. With the now undervalued indexes, this opportune moment could prove incredibly lucrative. I doubt even such a bold and brilliant move would be enough to save the conservative party from electoral defeat but who knows, one thing is for sure though, it’s success would secure Jeremy Hunt a place in the history books as future generations lord his name for the retirement and security he had delivered them. It’s not a bad punt for Hunt, a chancellor potentially on his way out.  

Alexander Grant Headley-Brown