Rachel Reeves needs to channel Alexander the Great, says City group

The Association of British Insurers called on Rachel Reeves to break the “regulatory Gordian knot” last night – Hannah Gurga told City AM why the group is calling for faster reform.

According to ancient Greek legend, he who untied the Gordian knot was destined to rule over the whole of Asia. Unravelling the stubborn splice was seen as a task of such complexity that no mere mortal could achieve it.

Then, Alexander the Great arrived and brutally cut through it with his sword.

Comparisons between Rachel Reeves and the Macedonian conqueror of antiquity have not been forthcoming in Labour’s first few months in power. 

But, faced with a tangle of red tape surrounding Britain’s big investment firms, the Association of British Insurers (ABI) last night called on the Lewisham-born Chancellor to embrace her inner empire-builder and unleash the City. 

“This isn’t a problem that can be solved by careful untangling, it needs the bold stroke of Alexander the Great’s sword if we are to cut through this regulatory Gordian knot,” the ABI’s director general, Hannah Gurga, said at a dinner.

Gurga, a former Treasury official who heads the body representing 300 of Britain’s biggest insurers and some £1.5 trillion in assets, set out a rallying cry for more streamlined rules in financial services and called for faster action in boosting growth and risk-taking.

“We want to see a regulatory environment that enables growth, and in that sense, I [have been] pleased to hear the government talk about ripping up bureaucracy that’s blocking investment,” she told City AM in a recent interview.

The comments point to a push from the Chancellor to strip back red tape from City firms and put financial regulators on a growth footing.

In her maiden Mansion House Speech last week, alongside a shake-up of the local government pension system designed to boost investment, Reeves revealed she had also written to the FCA and Prudential Regulation Authority (PRA) to reshape their remit with a focus on growth.

While Britain’s financial rulemakers were given a secondary objective to consider growth and competitiveness in 2023, many in Westminster and the City have criticised the speed with which they have embraced the new mandate.

Gurga has banged the drum for faster regulatory reform and called for greater domestic investment by the insurance sector since taking over the ABI in 2022. Her industry body is now at the heart of initiatives seen as central to unlocking trillions in capital to support the government’s growth agenda.

The Mansion House Compact is one of those – an agreement co-ordinated by the previous government which committed 11 of the UK’s biggest pension money managers to invest five per cent of their assets into unlisted equities by 2030.

The ABI is also overseeing the Investment Delivery Forum, a group made up of firms including Aviva, Phoenix and Lloyds Banking Group which is looking to channel institutional cash into infrastructure projects – key to the success of the government’s new National Wealth Fund.

“We pledge to invest £100bn over the next 10 years in green projects across the UK, and the Investment Delivery Forum is our way of enabling that,” Gurga told City AM.

“Initiatives like the National Wealth Fund, we’re very positive about its potential, and we are keen to find ways that we can work through our Investment Delivery Forum to realise those opportunities.”

The insurance sector has been freed up by a new solvency framework, which will replace EU era Solvency II rules, and it is now looking for initiatives to invest in around the country. Gurga said the group is on the hunt for more “investable propositions” across three core areas: renewable energy, energy networks – primarily electric vehicle charging infrastructure – and housing.

“We’re working very collaboratively with the PRA and with other partners to find ways to accelerate that investment,” she said. “So we’re positive about the change, and it’s been a long, hard effort.”

Among the key wins it claims so far are a £3.2bn commitment from member firm Aviva into EV charging networks, a £500m commitment from M&G toward “climate positive” housing and £90m funding from Phoenix toward social housing.

However, she has called for a change in mindset among UK regulators and the industry itself to more quickly channel capital into the UK.

“It’s like there’s a need for a reset, a cultural reset. How do we move away from a mindset of safety-ism – including within the regulators – to one where we accept that risk is a prerequisite to reward,” She added. “You’ve got to take some risk if you’re going to get that return.”

In her speech to the industry last night, she said regulators were rowing in behind the push and ministers had recognised the need for a slimmer rulebook. But now they needed to take decisive action.

“Our government has recognised that the UK has been regulating for risk, not regulating for growth,” Gurga said. “Our government has taken up Alexander the Great’s sword . . . and now our government must have the courage to use it.”