The UK’s New Sovereign Wealth Fund: Some Preliminary Observations

Guanie Lim, Chen Li and Wellington N.K Aweke
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Guanie Lim: National Graduate Institute for Policy Studies, Tokyo, Japan
Chen Li: The Chinese University of Hong Kong, Hong Kong
Wellington N.K Aweke: Ministry of Finance, Ghana

No 24-09, GRIPS Discussion Papers from National Graduate Institute for Policy Studies

Abstract: The newly elected Labour government of the United Kingdom (UK) introduced the National Wealth Fund (NWF) in July 2024, a £7.3 billion ($9.34 billion) initiative aimed at bolstering investment in key infrastructure projects, particularly in industries crucial for the green energy transition. The NWF is intended to attract private sector investment, with the government partly sharing the financial risk of costly projects with long gestation period. Chancellor Rachel Reeves describes the fund as a ‘concierge’ for investors, designed to streamline investment into the UK. However, there is debate about whether the NWF is an orthodox sovereign wealth fund found in countries with budget and/or trade surpluses such as Norway and Singapore. Instead, it appears more akin to a development or strategic sovereign wealth fund, channelling capital towards industries critical to the UK’s long term economic health. The fund’s initial budget, although significant in and of itself, pales in comparison to the world’s largest sovereign wealth funds and may fall short of the estimated £50-60 billion ($64-77 billion) needed annually to meet the UK’s net zero goals. Additionally, concerns have been raised about the fund’s sustainability and whether it can effectively address the UK’s underinvestment malaise, which stems from structural factors such as a blocker-friendly planning system and post-Brexit political uncertainties.

Keywords: Sovereign Wealth Funds; United Kingdom; Net Zero; Public Investment; Market Failure; Critical Industries (search for similar items in EconPapers)
Pages: 11 pages
Date: 2024-09
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