DISCUSSION Insurance giants leading the way

by Philip Sadler _______1st September 2016

Invest in our future, not in our past.

One of Britain’s biggest insurers has said it is ready to invest billions in the country’s infrastructure. Mark Wilson, chief executive of Aviva, which has about £350 billion of assets, said he wanted to put more of the insurer’s money into UK investments and that Brexit had not changed his view on the attractiveness of the company’s home market (The Times, August 5th 2016).

Another insurance company CEO, Nigel Wilson of Legal and General has expressed similar views (The Sunday Times, July 3rd 2016). L&G has led the way among insurers in investing in “real assets” – new infrastructure and housing. In the past three years it has sunk £7bn of a £30bn target into developments including the London Gateway deep-sea port, a science park in Newcastle and regeneration schemes in Bracknell, Cardiff and Salford.

The Tomorrow’s Company Report The Ageing Population, Pensions and Wealth Creation (2005), pointed to the need to channel peoples’ savings into investments which would generate new assets as distinct from existing financial and property assets:

‘The prosperity or standard of living of a society is a function of its ability to create wealth in both the market and non-market sectors…The ability to go on creating wealth will be a function of the amount and efficiency of investment in future productive potential either in terms of capacity growth or productivity growth… The possibility of an ‘investment gap’ could pose a greater threat to the UK economy than a savings gap.’

In other words we need to invest in our future, not in our past. We need to channel more pension fund cash into infrastructure projects. Companies need to turn surplus cash into investments – not just in new plant and equipment but in R&D and training as well.  The productivity gains that will be needed to ensure a prosperous future cannot be achieved by returning cash to shareholders – so let’s invest in our future!