Lloyds boss calls for UK to step up green investment and provide ‘clarity over the future’

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The chief executive of Lloyds Banking Group has called on the UK to invest more in the green transition and answer questions about the country’s economic model.

Charlie Nunn said the US’s $369bn climate law and EU measures had created “incentives for UK and international corporates and institutional capital to put money in other locations that creates a different competitive environment.

“We need to see investment in the UK in industries and sectors where we see opportunities for growth,” he told the FT Global Banking Summit on Tuesday. “Many corporations are looking at investment cases [elsewhere] and putting their money in other markets.”

The opposition Labour party has said it will borrow a net £20bn a year by the end of the next parliament for a “green prosperity plan” to try to keep pace with Joe Biden’s landmark Inflation Reduction Act.

But Rishi Sunak’s government says it will take a more “hard-headed” approach to subsidies and has rolled back some green targets.

Nunn added that the UK had made a “good case” at a global investment summit hosted by Sunak this week, while blaming UK bank shares’ underperformance partly on the economic uncertainty that followed the “mini-Budget” of Liz Truss, the prime minister’s predecessor.

Truss’s September 2022 “mini-Budget”, which involved extensive unfunded tax cuts, spooked financial markets, triggering a jump in UK government borrowing costs, a slide in sterling and a pensions system crisis. She was forced out of office weeks later.

The Lloyds chief called for British authorities to provide “clarity over the future” and “a level playing field with competition”, and to “take out the uncertainty that our investors see in the UK.”

He added that international investors remained wary of investing in UK lenders because they feared that politicians could introduce windfall taxes on bank profits similar to measures in Spain and the Netherlands.

A ban imposed by the Bank of England on banks paying dividends during the Covid-19 pandemic also weighed on investor sentiment, he said.

The Lloyds boss warned last year of “nervousness” and “concerns about the UK as an investment thesis”. On Tuesday, he said economic growth had recovered since the Covid-19 pandemic and that there was “more confidence in the UK than at this time last year”.

But he added that international investors still had “questions” about the UK’s productivity, inflation and exchange rate.

Nunn said he hoped a new strategy unveiled by the bank last year, combined with a commitment to return more capital to shareholders through buybacks and dividends, would boost the bank’s share price.

Lloyds has sought to diversify its income away from lending and retail banking since Nunn took over as chief executive from António Horta-Osório in 2021. The lender’s strategy also involves a push towards digital services, with more than 2,500 jobs at risk as part of a strategic review.

Lloyds’ shares have fallen about 10 per cent this year and trade at a discount to the book value of its assets.

“We need to get the confidence that we can grow in this economy in that way if we can help investors re-rate the stock,” Nunn said.

He added that Lloyds had no plan to go back into investment banking and reiterated that it was on course to achieve its target of adding £1.5bn to revenues by 2026.