Tag: Mansion House speech

Chancellor’s Mansion House Reforms to boost typical pension by over £1,000 a year

  • Chancellor outlines reforms to boost pensions and increase investment in British businesses
  • the ‘Mansion House Reforms’ could unlock an additional £75 billion for high growth businesses, while reforms to defined contribution pension schemes will increase a typical earner’s pension pot by 12% over the course of a career
  • comprehensive reforms will increase pension pots by as much as £16,000

The reforms will also unlock up to £75 billion of additional investment from defined contribution and local government pensions, supporting the Prime Minister’s priority of growing the economy, and delivering tangible benefits to pensions savers.

The United Kingdom has the largest pension market in Europe, worth over £2.5 trillion. Over the past ten years Automatic Enrolment has helped an extra ten million people save for their futures, with £115 billion saved in 2021, but how this money is invested is limiting returns for savers. Comparable Australian schemes invest ten times more in private markets than UK schemes, reaping the rewards that UK savers are missing out on.

To level the playing field, the Chancellor and the Lord Mayor have supported an agreement between nine of the UK’s largest Defined Contribution pension providers, committing them to the objective of allocating 5% of assets in their default funds to unlisted equities by 2030. These providers represent over £400 billion in assets and the majority of the UK’s Defined Contribution workplace pensions market.

This could unlock up to £50 billion of investment in high growth companies by 2030 if all UK Defined Contribution pension schemes follow suit.

More effective investments by defined contribution pension schemes will also increase savers’ pension pots by up to 12%, or as much as £16,000 for an average earner.

Chancellor of the Exchequer Jeremy Hunt said: “British pensioners should benefit from British business success. By unlocking investment, we will boost retirement income by over £1,000 a year for typical earner over the course of their career.

“This also means more investment in our most promising companies, driving growth in the UK.”

Secretary of State for Work and Pensions Mel Stride said: “British workers should have the confidence that their pension savings are working as hard as they are.

“Our reforms will benefit savers and society – unlocking investment into pioneering UK businesses, growing the economy, and helping the record number of people in this country saving into a pension to achieve the retirement they want.”

The Chancellor’s Mansion House Reforms will also deliver better returns for savers through a new Value for Money Framework which will make clear that investment decisions made by pension firms should be based on overall long-term returns and not simply costs. Pension schemes which are not achieving the best possible outcome for their members will be wound up into larger, better performing schemes.

Analysis shows that over a five-year period there can be as much as 46% difference between the best and worst performing pension schemes. This means that a saver with a pot of £10,000 could have notionally lost £5,000 over a 5-year period from being in a lowest performing scheme.

The Mansion House Reforms will be guided by the Chancellor’s three golden rules: to secure the best possible outcome for pension savers; to always prioritise a strong and diversified gilt market as we seek to deliver an evolutionary, rather than revolutionary, change in our pensions market; and to strengthen the UK’s position as a leading financial centre to create wealth and fund public services.

To ensure that the money unlocked by these reforms is invested quickly and effectively, the Chancellor has asked the British Business Bank to explore the case for government to play a greater role in establishing investment vehicles, drawing upon the BBB’s skills and expertise.

This will complement the £250 million of support that government has made available through the Long-term Investment for Technology and Science (LIFTS) initiative to incentivise new industry-led investment vehicles.

The government will also encourage the establishment of new Collective Defined Contribution funds which can invest more effectively by pooling assets as well as launch a call for evidence to explore how we can support pension trustees to improve their skills, overcome cultural barriers and realise the best outcomes for their pension schemes and subsequently their members.

Defined Benefit pensions

For the Local Government Pension Schemes a consultation will be launched on setting an ambition to double existing investments in private equity to 10%, which could unlock £25 billion by 2030. The consultation proposes a deadline of March 2025 for all Local Government Pension Scheme funds to transfer their assets into LGPS pools and setting a direction that each pool should exceed £50 billion of assets.

To improve outcomes for savers in a highly fragmented market, with over 5,000 Defined Benefit Schemes, the government will set out its plans on introducing a permanent superfund regulatory regime to provide sponsoring employers and trustees with a new way of managing Defined Benefit liabilities.

A new call for evidence will also launch tomorrow on the possible role of the Pension Protection Fund and the part Defined Benefit schemes could play in productive investment whilst securing members’ interests and protecting the sound functioning and effectiveness of the gilt market.

Capital Markets

The UK has the largest stock market in Europe and one of the deepest in the world – the London Stock Exchange had the most Initial Public Offerings (IPOs) outside of the US in 2021.

A comprehensive set of reforms will help attract the fastest growing companies in the world to grow and list in the UK. Prospectuses will be simplified, another milestone of Lord Hill’s UK Listing Review, replacing the EU’s outdated regime.

Firm’s prospectuses for investors will be easier to produce, more accessible and understandable, saving companies time and money and attracting more firms to do business in the UK.

Protectionist rules inherited from our time in the EU will be abolished. The Share Trading Obligation and Double Volume Cap have held back UK businesses and will be removed so firms can access the best and most liquid markets anywhere in the world.

The government has also accepted all of Rachel Kent’s Research Review published today, paving the way for a new ‘Research Platform’ that will provide a one-stop-shop for firms looking for research experts. It also sets the path for potentially removing the unbundling rules – an inherited EU law that requires brokers to charge a separate fee for research.

The Chancellor will set out plans to establish an entirely new kind of stock market that allows private companies to access capital markets without floating on a stock exchange. This ‘Intermittent Trading Venue’ would be a world first and will help firms grow and boost the UK economy. It will be complemented by a move to make shares fully digital rather than written on paper, saving businesses time and money.

This builds on the Chancellor’s Edinburgh Reforms and Solvency II reforms which will unlock over £100 billion of productive investment from insurance firms across the UK over a decade.

Seizing the opportunities of the future

To ensure the continued success of the UK’s world-leading financial services sector, firms must be ready to innovate faster, with regulators willing to support them as they do.

Following the Financial Services and Markets Act 2023 passing into law, the government has announced that it is commencing repeal of almost 100 pieces of unnecessary retained EU law for financial services, further simplifying the UK’s regulatory rulebook.

The government launched an independent review into the future of payments – led by Joe Garner, former Chief Executive Officer of Nationwide Building Society – to help deliver the next generation of world class retail payments, including looking at mobile payments.

The government also welcomes a report suggesting ways to move to fully digital shares, scrapping outdated paper-based shares. This will make markets more efficient and modernize how people own shares.

Further information

  • The Mansion House Compact members are: Aviva; Scottish Widows; L&G; Aegon; Phoenix; Nest; Smart Pension; M&G; Mercer.
  • The package of reforms announced yesterday could help increase pension pots for an average earner who starts saving at 18 by 12% over their career – over £1,000 more a year in retirement – all whilst supporting UK economy, businesses, and employment.
  • Analysis shows a difference in returns between schemes over a 5-year period of up to 46% in some cases. This means that a saver with a pot of £10,000 could have notionally lost £5,000 over a 5-year period from being in a lowest performing scheme.

Reaction to the Chancellor’s Mansion House Reforms

Jamie Dimon, Chairman & CEO, JPMorgan Chase said: “Great financial centers stay competitive by responding to the market and evolving through the kinds of important iterations that the Chancellor has announced.

“It’s also good to see the U.K. preparing for the industries of tomorrow considering the great promise of life sciences and A.I. as cornerstones of the economy in the years to come.”

Sir Jon Symonds CBE, Chair, GSK said: “I welcome these important reforms which will further strengthen the UK capital markets and support economic growth. 

“The changes will help increase investment returns for pension savers through improved access to all asset classes including in high growth sectors, and ensure the UK’s most innovative companies are better supported by UK capital to stay in this country as they scale to maturity.”

Brent Hoberman, Executive Chairman & Co-Founder, Founders Forum, Founders Factory said: “The planned pension reforms will enable for capital to be productively invested in funds and scaleup companies in the UK. 

“This should be welcome news to the UK industries of the future, their ability to attract more capital will create more national champions and generate growth, jobs and increased tax revenue.

“The reforms will enable the UK to build on the positive momentum in these key parts of the economy drive further synergies between it’s world class financial institutions and entrepreneurial base.”

C. S. Venkatakrishnan, Group Chief Executive, Barclays said: “The UK has needed a bold, forward-looking policy agenda and industrial strategy to grow the economy. 

“These Mansion House Reforms are an important step in the right direction in mobilising private capital to support growth and innovation.”

Irene Graham OBE, CEO, ScaleUp Institute said: “The package of measures announced by the Chancellor today are very much welcomed by the ScaleUp Institute.

“They contain significant and innovative solutions which will help to enable easier and simpler access to capital markets and patient growth capital. These new initiatives, coupled with the reforms already underway, will support and fuel the global ambitions of our scaleups, and high-potential scaling businesses, across all sectors and all areas of the UK.”

Miles Celic, Chief Executive Officer, TheCityUK, said: ““The competitiveness and attractiveness of any successful international financial centre must, by definition, always be a work in progress. The Chancellor is right to be ambitious in building on the UK’s successes and recognising that we can’t afford to be complacent.

“The Mansion House Reforms are ambitious, pragmatic and necessary. They will underpin the UK industry’s future success. Most importantly, their main beneficiaries will be the British people, who will gain from greater investments in growing businesses, revitalising communities and improving retirements.”

Chris Hulatt, Co-Founder, Octopus Group said: ““We welcome government’s efforts to make the UK a more attractive place to start a business, and support measures that provide additional opportunities for private companies to raise capital.

“Finding new ways for the most skilled and talented entrepreneurs to access capital as they build businesses is fundamental to helping the UK maintain its place as the best place to start, build and scale a business.”

Noel Quinn, Group Chief Executive, HSBC said: “I welcome the strong and comprehensive package of measures announced by the Chancellor in his Mansion House speech. 

“Unlocking equity to support companies in innovative high-growth sectors such as technology and life sciences is vital to the future growth of the UK economy.”

Lord Mayor, Nicholas Lyons said: ““These reforms and the Mansion House Compact mark a historic turning point that will accomplish the dual aim of securing a brighter future for retirees and channelling billions into our economy. 

“I’m proud to have convened key industry players to make this commitment to unlock £50bn in capital by the end of the decade which will improve returns for pension savers and support firms to grow, stay and list in the UK.”

Tim Orton, Chief Investment Officer, Aegon UK said: ““Aegon UK is proud to be a founder signatory of the Mansion House Compact which will help deliver better long-term outcomes for our customers.

“We are committed to ensuring our customers can access and share in the growth and success of innovative companies we invest in. We will use our scale and expertise to develop investment solutions seeking to improve the retirement outcomes of the millions of members of the defined contribution pension schemes we support.  The Compact will also create opportunities that help deliver our climate targets as we progress towards net zero.”

Sir Nigel Wilson, Group CEO, Legal & General said: “As the UK’s largest manager of money for pension clients, L&G is pleased to support the ambition set by the Compact.

“Increasing investment in science, technology and infrastructure will support better returns for the tens of millions saving for their retirement, as well as stimulate much needed long-term growth for the UK economy.”

Mark Fawcett, CEO, Nest Invest said: ““For many years now, illiquid assets have been integral to diversified DC pension schemes around the world.

” It’s been a key driver behind Nest setting up our own private market mandates to ensure our members aren’t missing out. Nest will continue to increase our investment in unlisted equities, helping our 12 million members benefit from the strong returns these types of deals can typically offer.”

Ruston Smith, Chair, Smart said: ““Smart Pension is committed to securing better outcomes for long-term savers. Giving UK savers access to higher net returns by investing in unlisted equities, including innovative, high-growth UK companies as part of a well diversified portfolio, will deliver these outcomes over time.

“We are pleased to be a signatory of the Mansion House Compact and, as a successful British fintech, we are proud to be supporting the country’s technology sector, helping home-grown start-ups and scale-ups to flourish and thrive.”

Scottish Widows, CEO, Chirantan Barua said: ““The industry needs to modernise the investment options available to customers. 

“ With the right consumer protections in place, the proposals announced today could make a huge difference to our customers and the wider UK economy. I’m proud that Scottish Widows is a founding signatory of the Mansion House Compact.”

Phil Parkinson, Investments and Retirement Leader, Mercer said: “Mercer supports proposals that lead to improved pension scheme member outcomes.

“As a global investment solutions provider, we see first-hand the value that illiquid asset allocations can bring to investors’ portfolios from a risk and a return perspective and are in favour of initiatives designed to unlock this asset class for DC members.”

Edward Braham, Chair, M&G said: “Patient capital put to work in companies or projects over multiple decades is essential to support economic growth and importantly, capture value for people’s pensions as they save for their retirement.

“ M&G’s heritage is in investing in private markets, whether it is through infrastructure, real estate or innovative companies with purpose. We are democratising access to private markets through the Prudential With Profits Fund, and are supportive of DC pension reforms that encourage more investment of this kind that has potential to result in positive outcomes for savers.”

Mike Eakins, Chief Investment Officer, Phoenix Group said: ““We are proud to sign the Compact, which is an important step to allow UK long-term savers to invest in a more diversified portfolio, giving them access to the potential returns of a broader range of assets, in line with their international counterparts.

“Currently, only 9% of UK pension funds are invested in alternative assets as compared to 23% in other major pensions markets. With the right regulatory environment, Phoenix Group could invest up to £40 billion in sustainable and/or productive assets to support economic growth, levelling up and the climate change agenda whilst also keeping policyholder protection at its core.”

Chancellor: A strong economy will grow business and boost pensions savings

  • Tomorrow (10 July) Jeremy Hunt will outline how he will unlock capital for high-growth businesses and boost outcomes for pension savers, guided by ‘three golden rules’.
  • Chancellor to use first Mansion House speech to set out how Britain’s financial services sector will support the Prime Minister’s priority to grow the economy.
  • Measures will mean that more investment is available for high-growth businesses, which are key to creating good jobs, opening up opportunity and contributing millions in tax receipts.

Chancellor Jeremy Hunt will deliver his first Mansion House address tomorrow (10 July) setting out how Britain’s financial services will support the drive for long-term sustainable growth across the country.

In front of an audience of CEOs and leaders from the sector in the City of London, the Chancellor will set out his “Mansion House Reforms” to drive the Prime Minister’s priority to grow the economy by making the UK the most innovative and competitive financial centre in the world.

The financial and related professional services industry employs over 2.5 million people – something Hunt will describe as starting from a “position of strength” – and generates more than £100 billion in tax revenue, paying for half the cost of running the NHS.

He will also hail the importance of the traditionally “nimble” and “agile” sector for Government’s vision of Britain as a science superpower and the world’s next Silicon Valley.

The Chancellor is expected to say: ““I want to lay out plans to enable our financial services sector to increase returns for pensioners, improve outcomes for investors and unlock capital for our growth businesses.”

The reforms will not only help create jobs and increase tax revenues – which ultimately helps to fund vital public services – but will also lead to better returns for pension savers in the long term.

The Mansion House Reforms will be guided by the Chancellor’s three golden rules. He is expected to say: ““Firstly everything we do we will seek to secure the best possible outcomes for pension savers, with any changes to investment structures putting their needs first and foremost.

“Secondly we will always prioritise a strong and diversified gilt market. It will be an evolutionary not revolutionary change to our pensions market. Those who invest in our gilts are helping to fund vital public services and any changes must recognise the vital role they play.

“The third golden rule is that the decisions we take must always strengthen and never compromise the UK’s competitive position as a leading financial centre able to fund, through the wealth it creates, our precious public services.”

Hunt is expected to announce a wide-ranging package of measures that build upon the Edinburgh Reforms announced in December last year and deliver upon the vision that the Prime Minister himself set out at Mansion House in 2021 – with a smarter rulebook tailored for Britain’s needs.

On the economic headwinds facing the UK economy, the Chancellor will say that there can be “no sustainable growth without first eliminating the inflation that deters investment and erodes consumer confidence” and promise that the government will continue to honour its “responsibilities to those struggling the most” in the face of inflation.

David Livingstone, Citi’s Chief Executive Officer (Europe, Middle East and Africa) said: “Citi strongly supports a UK strategy focussing on growth and improving competitiveness.

“A government plan to reform the pension system to emphasise net returns would be key to the collective prosperity of all the country’s pensioners, while also creating a higher growth, more productive, and innovative economy.

“Based on Citi’s experience working with investors and pension funds around the world, consolidating funds often increases efficiency and improves access to global, diversified investment opportunities, which would be immensely beneficial to the UK, home to the second-largest pool of long-term capital in the world.”

Hannah Gurga, Director General, ABI said: “We share the Government’s ambition to make pension money work as hard as possible to deliver better returns for savers and the UK economy.

“A long-term strategy with savers at its heart and working with the sector are key to delivering on this ambition. We and our members look forward to working closely with Government as it fleshes out its plans over the summer.”

Dr Dan Mahony, Government Life Sciences Investment Envoy and Chair of the UK BioIndustry Association (BIA), said: “The unlocking of pension fund assets for investment into the UK life sciences sector will enable everyone saving for their retirement to benefit financially from Britain’s world-leading strength in drug discovery and development, whilst supercharging business growth and accelerating medical progress.

“We have great science and great people, now they will be supported by greater capital from the UK, adding to what the sector is already attracting from overseas investors.

“More domestic investors championing our growing companies will help them to put down deeper roots here, producing more jobs and benefits for the UK economy.”

Chris Cummings, Chief Executive, the Investment Association said: “The Chancellor’s comments recognise that investment must be at the heart our economy – providing for the financial futures of UK households through pensions that deliver good returns, even in the most challenging economic times, and powering growth by investing in British businesses.

“The recognition of the central role of long term investment is the foundation of successful policy.

“With the right regulatory framework, pension schemes will be able to invest productively and sustainably, unlocking further investment for innovative growth companies, and improving returns for savers by broadening investment options. In tandem with reforms to the listings regime, this will help the UK to become a more globally attractive place for companies to list, invest and do business.

“Achieving this new economic dynamism will require the government to bring together regulators, policymakers, and businesses, to create a forward-looking and internationally competitive investment framework, based on a stable, long term policy approach.

“This will also improve the gilt market, ensuring UK government debt remains attractive to domestic and international investors. 

“Delivering these outcomes will require us to strike the right balance between risk and reward and between protection and innovation. Investment managers stand ready to play our part.”

The return of geopolitics: Foreign Secretary’s Mansion House speech

Foreign Secretary Liz Truss said that “geopolitics is back” and argued for a “reboot” in the free world’s approach to tackling global aggressors in the wake of the Ukraine crisis:

My Lord Mayor, Your Excellencies, Ladies and gentlemen.

According to some, this was destined to be the era of authoritarianism.

Three years ago Vladimir Putin said Western liberalism was dead.

Last year President Xi argued that the west is declining.

In April 2022 things look very different.

Recent months have shown the deep resilience of the human spirit and of free societies

Faced with appalling barbarism and war crimes, which we’d hoped had been consigned to history, the free world has united behind Ukraine in its brave fight for freedom and self-determination.

Those who think they can win through oppression, coercion or invasion are being proved wrong by this new stand on global security – one that not only seeks to deter, but also ensures that aggressors fail.

We cannot be complacent – the fate of Ukraine hangs in the balance.

But let’s be clear – if Putin succeeds there will be untold further misery across Europe and terrible consequences across the globe.

We would never feel safe again.

So we must be prepared for the long haul. We’ve got to double down on our support for Ukraine. And we must also follow through on the unity shown in the crisis. We must reboot, recast and remodel our approach.

My vision is a world where free nations are assertive and in the ascendant.

Where freedom and democracy are strengthened through a network of economic and security partnerships.

Where aggressors are contained and forced to take a better path.

This is the long term prize: a new era of peace, security of prosperity.

Let’s be honest. The architecture that was designed to guarantee peace and prosperity has failed Ukraine.

The economic and security structures that were developed after the Second World War and the Cold War have been bent out of shape so far, they have enabled rather than contained aggression.

Russia is able to block any effective action at the UN Security Council. Putin sees his veto as a green light to barbarism.

He’s walked away from the NATO-Russia Founding Act and the Treaty on Conventional Armed Forces in Europe. He’s violated multiple measures on arms control.

The G20 can’t function as an effective economic body while Russia remains at the table.

The Soviet Union used to regularly use their UN veto, but, for all the many evils they inflicted, even they behaved with some kind of rationality on the world stage.

They were able to stick to deals when they saw risks to strategic stability, as they did with the Anti-Ballistic Missile Treaty.

They would de-escalate when they were confronted and called out, as with the Cuban Missile Crisis 60 years ago.

And they had their eye on their global reputation.

None of these factors apply to Putin.

We are dealing with a desperate rogue operator with no interest in international norms.

This is at a time when the world economy had never been more open to Russia.

During the Cold War western allies fuelled each other’s prosperity, and we restricted flows of trade, investment and technology to the USSR.

In the 1990s these constraints were removed but it didn’t lead to the expected gains in economic openness and democracy.

We took progress for granted instead of applying the necessary carrots and sticks.

And leaders like Putin spurned the opportunity to change because they feared losing control. Instead they took the money from oil and gas and used it to consolidate power and gain leverage abroad.

Wandel durch handel – the assumption that economic integration drives political change – didn’t work.

We now need a new approach, one that melds hard security and economic security, one that builds stronger global alliances and where free nations are more assertive and self-confident, one that recognises geopolitics is back.

Britain has always stood up to bullies.

We have always been risk takers.

So we are prepared be bold, using our strength in security and diplomacy, our economic heft, and our will and agility to lead the way.

We are already stepping up in Ukraine.

The war in Ukraine is our war – it is everyone’s war because Ukraine’s victory is a strategic imperative for all of us.

Heavy weapons, tanks, aeroplanes – digging deep into our inventories, ramping up production. We need to do all of this.

Our sanctions have already seen Russia facing its first external debt default for a century. We need to go further.

There must be nowhere for Putin to fund this appalling war. That means cutting off oil and gas imports once and for all.

At the same time, we need to deliver support to the Ukrainian people. It means helping refugees, it means delivery of food, medicine, and other essentials, and it means keeping the economy afloat.

It also means holding the Putin regime to account for the appalling crimes that have been committed.

And, when the guns finally fall silent in Ukraine, it means making sure Kyiv has the resources it needs to maintain security, deter further attacks, and rebuild.

That’s why we are working on our joint commission with Poland to ensure Ukraine is equipped with NATO-standard weapons.

And it’s why we are determined to work with the US, with the EU and other allies on a new Marshall Plan for the country.

Ukraine deserves nothing less than a landmark international effort to rebuild their towns and cities, regenerate their industries, and secure their freedom for the long term.

We are doubling down.

We will keep going further and faster to push Russia out of the whole of Ukraine.

And this has to be a catalyst for wider change.

We must also apply this tough stance to the threats that are emerging beyond Ukraine.

Our new approach is based on three areas: military strength, economic security and deeper global alliances.

Firstly, we need to strengthen our collective defence.

In the words of President Zelenskyy: “Freedom must be better armed than tyranny.”

Ahead of the NATO summit in Madrid, we need to lift our sights.

We have long argued that NATO needs to be flexible, agile and integrated.

The Eastern Flank must be strengthened, and we must support crucial states like Poland. That’s why we are increasing our troop presence and we’re deepening our defence cooperation.

We also have to learn the lessons of Ukraine.

The UK sent weapons and trained Ukrainian troops long before the war started.

But the world should have done more to deter the invasion. We will never make that same mistake again.

Some argue we shouldn’t provide heavy weapons for fear of provoking something worse.

But my view, is that Inaction would be the greatest provocation. This is a time for courage not for caution.

And we must ensure that, alongside Ukraine, the Western Balkans and countries like Moldova and Georgia have the resilience and the capabilities to maintain their sovereignty and freedom.

NATO’s open door policy is sacrosanct.

If Finland and Sweden choose to join in response to Russia’s aggression, we must integrate them as soon as possible.

And we reject the false choice between stronger traditional defence and modern capabilities. We need to defend ourselves against attacks in space and cyberspace as well as by land, air and sea.

We also reject the false choice between Euro-Atlantic security and Indo-Pacific security. In the modern world we need both.

We need a global NATO.

By that I don’t mean extending the membership to those from other regions.

I mean that NATO must have a global outlook, ready to tackle global threats.

We need to pre-empt threats in the Indo-Pacific, working with our allies like Japan and Australia to ensure the Pacific is protected.

And we must ensure that democracies like Taiwan are able to defend themselves.

All of this will require resources.

We are correcting a generation of underinvestment.

That’s why the Prime Minister has announced the biggest investment in our Armed Forces since the Cold War. We recognised Russia as the most acute threat in our Integrated Review, adopting the same vigilance as NATO’s Eastern Allies.

Others are now also stepping up as well. But we all need to go further.

Spending 2% on defence must be a floor, not a ceiling.

There is no substitute for hard military power, backed by intelligence and diplomacy.

Secondly, we need to recognise the growing role that the economy plays in security.

In the UK we are now using all of our economic levers – trade, sanctions, investment and development policy – in a much more assertive way.

We recognise that growth from cheap gas and money syphoned from kleptocracies is growth built on sand. It’s not the same as real, sustained growth from higher productivity and greater innovation.

Free trade and free markets are the most powerful engine of human progress. We will always champion economic freedom.

But free trade must be fair – and that means playing by the rules.

For too long many have been naïve about the geopolitical power of economics. Aggressors treat it as a tool of foreign policy – using patronage, investment and debt as a means to exert control and coerce.

They are ruthless in their approach. Our response won’t mirror their malign tactics, but we will match them in our resolve.

It’s time to wise up.

Access to the global economy must depend on playing by the rules.

There can be no more free passes.

We are showing this with the Russia-Ukraine conflict – Russia’s pass has been rescinded.

We are hitting them with every element of economic policy.

We have raised tariffs on Russian goods. We’ve cut them off from WTO terms. We’ve banned their ships from our ports, we’ve banned their planes from our airports.

We have sanctioned more individuals and organisations than any other nation, hitting Russia’s banks, oligarchs, defence companies, Central Bank reserves, and oil and gas supplies.

We’re cutting off the funding for Putin’s war effort.

We are also cutting investment ties with Russia – banning all new outward investment and ending the investor visa.

At the same time, we are removing all import tariffs for Ukraine, and we’re supporting the Ukrainian economy with loan guarantees, fiscal support and investment.

We are showing that economic access is no longer a given. It has to be earned.

Countries must play by the rules.

And that includes China.

Beijing has not condemned Russian aggression or its war crimes. Russian exports to China rose by almost a third in the first quarter of this year.

They have sought to coerce Lithuania. They are commenting on who should or shouldn’t be a member of NATO. And they are rapidly building a military capable of projecting power deep into areas of European strategic interest.

But China is not impervious.

By talking about the rise of China as inevitable we are doing China’s work for it.

In fact, their rise isn’t inevitable. They will not continue to rise if they don’t play by the rules.

China needs trade with the G7. We represent half of the global economy. And we have choices.

We have shown with Russia the kind of choices we’re prepared to make when international rules are violated.

And we’ve shown that we’re prepared to prioritise security and respect for sovereignty over short-term economic gain. Not least because we know that the cost of not acting is higher.

The fact is that most of the world does respect sovereignty. It is only a few pariahs and outliers that don’t.

So we are working more closely with allies and friends – old and new.

And the same assertive approach that can constrain our rivals, can be a powerful driver of prosperity and security.

That’s why we’re building new trade links, including working on Free Trade Agreements with countries like India and Indonesia and joining the CPTPP.

We’re sharing our expertise in science and tech, signing new partnerships around the world. And we’re providing a better offer on development, with investment to low-income countries that comes without malign strings attached.

By being tough and united, by working together and expanding trade, we can deprive aggressors of their leverage and we can reduce strategic dependence.

We can help each other to weather the storm of soaring food and energy prices. At the World Bank last week we secured $170 billion to help low income countries deal with these challenges.

And we are getting ahead in other possible areas of strategic dependence.

Whether it is minerals or rare earth metals, we are joining forces to prevent future problems before they emerge.

This is how we will strengthen our shared economic security.

That brings onto the final point, which is that our prosperity and security must be built on a network of strong partnerships.

This is what I have described as the Network of Liberty.

The fundamental principle is that no matter the challenges, we should not turn inward and pursue autarky.

We should reach out and embrace new partnerships, what the Dutch and others have called “open autonomy.”

In a world where malign actors are trying to undermine multilateral institutions, we know that bilateral and plurilateral groups will play a greater role.

Partnerships like NATO, the G7 and the Commonwealth are vital.

We should keep strengthening our NATO alliance with bonds around the world, like the UK-led Joint Expeditionary Force, the 5 Eyes, and the AUKUS partnership we have with the US and Australia.

And we want to keep growing our ties with countries like Japan, India and Indonesia.

We also should build on the strong core that we have in the G7.

During the UK’s Presidency last year I was pleased to bring friends like Australia, Korea, India, South Africa and ASEAN to the table.

The G7 should act as an economic NATO, collectively defending our prosperity.

If the economy of a partner is being targeted by an aggressive regime we should act to support them. All for one and one for all.

And to the 141 countries, from all continents, who voted to condemn Russia’s actions in the UN.

I hear your voice.

I share your outrage at Russia’s illegal war.

I share your fundamental belief in sovereignty, in fair play and the rule of law.

So let’s work together. Let’s forge deeper bonds. Let’s be better traders, investors, and partners than the aggressors.

The UK is prepared to do things differently, to think differently, and to work differently with you to get things done.

There is huge strength in collective action.

And let me be clear, this also applies to alliances that the UK is not part of.

We support the Indo-Pacific quad.

We support an outward-looking EU and we’re working closely together on Ukraine.

We support ASEAN, the African Union, and the US-Mexico-Canada trade agreement.

We reject the old ideas of hierarchical systems, exclusive groups and spheres of influence.

We want to see a network of partnerships stretching around the world, standing up for sovereignty and self-determination, and building shared prosperity.

The UK will be an active and agile part of this network.

Excellencies, ladies and gentlemen,

Geopolitics is back.

After the Cold War we all thought that peace, stability and prosperity would spread inexorably around the globe.

We thought that we’d learned the lessons of history and that the march of progress would continue unchallenged.

We were wrong. But this is no counsel of despair.

In the face of rising aggression we do have the power to act, and we need to act now.

We must be assertive. Aggressors are looking at what has happened in Ukraine. We need to make sure that they get the right message.

Together we have tremendous strength. Let’s use it to forge a better, more secure world and a stronger global economy.

This will take the energies of all the people in this room and beyond. It will be hard. But we have to step up and take responsibility.

The aggressors are prepared to be bold – we must be bolder.

That is how we will ensure that Ukraine’s sovereignty is restored.

That is how we will ensure that aggression and coercion fail.

That is how, across the globe, we will win this new era for peace, security and prosperity.

Thank you.