US investors are shunning Britain because of the growing car finance scandal, the boss of one of the UK’s biggest investment companies has warned.
Andy Briggs, the chief executive of Phoenix Group , said concerns about what the mis-selling scandal could mean for other industries was scaring away overseas cash.
He said: “US investors, who I talk to regularly, perceive a significant risk premium from retrospective regulation, which means they are reluctant to invest in the UK.”
Mr Briggs was referring to concerns that British courts will overrule established rules and open up companies to costly compensation claims for historical practices that were at the time deemed legal.
Such fears have been raised by the car finance mis-selling scandal. Lenders, including Lloyds Banking Group , could be forced to pay out billions in compensation after the Court of Appeal ruled that fees paid by banks to car salesmen for arranging financing were illegal.
The Court of Appeal’s ruling overturned a longstanding practice in the car finance industry and ran counter to guidance from the Financial Conduct Authority.
Mr Briggs said confidence in the UK had been shaken by a lack of “regulatory certainty”, with investors particularly concerned about the car finance crisis .
He said: “We need a stable and well-regulated market that fosters growth as well as protection. Regulatory certainty with a balanced approach is key to ensuring customer protection, market stability and essential future investment from overseas.”
Charlie Nunn, the chief executive of Lloyds Banking Group , gave a similar warning in December. The bank chief said the car finance crisis was “bleeding across the whole economy” and undermining confidence. Lloyds has set aside £1.2bn for possible pay-outs linked to the crisis.
Concerns about the broader impact on the economy prompted Rachel Reeves, the Chancellor, to try to intervene in the case and limit payouts.
However, in a set back for the Chancellor, who has been looking for ways to drive growth in the UK’s economy, including by pushing the country’s watchdogs to “tear down regulatory barriers” that are holding back investment, the move was blocked by the Supreme Court .
Mr Briggs was among a group of executives who met Ms Reeves in Canary Wharf this week to discuss potential growth opportunities. In the meeting, Ms Reeves called on companies to invest more heavily in fast-growing developing economies, with a view to striking closer links with countries including Turkey, Poland and Ukraine.
Phoenix Group is Britain’s largest pensions provider and one of the UK’s largest insurance companies. The company currently serves about 12m customers and employs approximately 6,600 British staff. Mr Briggs has been at the head of the FTSE 100 company since 2020.