Rachel Reeves is opening up Britain’s corporate bond market to small investors as part of a wider push to channel more household savings into UK businesses and revive London’s capital markets.
The chancellor will on Monday launch a government-backed initiative designed to make corporate bonds accessible to retail investors for the first time in years, scrapping barriers that had effectively restricted the market to institutions and wealthy individuals. Under the new rules, individuals will be able to invest in corporate bonds from as little as £1, compared with the previous £100,000 minimum that had become standard after EU-era regulations.
Speaking at an event hosted by the London Stock Exchange, Reeves is expected to declare the start of what she calls “a new golden age” for the City, framing the reforms as central to Labour’s ambition to boost productive investment and economic growth.
At the heart of the plan is a new kitemark system aimed at reassuring novice investors. The London Stock Exchange will introduce so-called “Access Bonds”, a designation that allows qualifying corporate bonds to be clearly identified on retail investment platforms. Alongside this, the Financial Conduct Authority will oversee a more stringent classification known as Plain Vanilla Listed Bonds, or PVLBs, reserved for straightforward bond structures with standardised terms.
Ministers hope the changes will revive direct retail participation in an asset class that has virtually disappeared from the UK. While British savers can easily buy government debt, direct ownership of corporate bonds is negligible, in stark contrast to the United States, where households hold more than $6 trillion of debt securities.
Officials argue that corporate bonds should appeal to cautious investors looking for predictable income. Blue-chip issuers typically offer yields at least a percentage point higher than government bonds, with repayment terms fixed over periods of two, five or ten years. Although bond prices can fluctuate with interest rates and inflation, default risk among large, established companies is seen as relatively low.
Banks, energy groups and major retailers including Lloyds, HSBC, BP, Shell, Tesco and BT are regular bond issuers, and many of their future offerings are expected to qualify for the new retail-friendly labels. Barclays estimates that around 13 million people in the UK currently hold £430 billion in cash savings that could, in principle, be suitable for investment in corporate bonds.
The reforms also form part of a broader overhaul of prospectus rules intended to make it easier and cheaper for companies to raise money in London. Thresholds for issuing a full prospectus have been significantly increased, particularly for secondary share issues and investment trusts, reducing regulatory friction and speeding up capital raising. The mandatory waiting period for IPO prospectuses has also been cut in half.
Industry figures say the package is long overdue. James Deal of RetailBook, which has long campaigned for greater retail participation in capital markets, described the reforms as a major step forward, coming six years after they were first recommended in a review led by former EU commissioner Jonathan Hill.
Some retail platforms have privately expressed concerns that new labels and acronyms could add complexity to an already jargon-heavy market. However, the exchange is pressing ahead with a public education drive under the banner “Bond With Britain”, aimed at improving understanding of how bonds work and the risks involved.
Reeves is expected to tell the audience that London’s financial sector is showing renewed strength, pointing to record highs in the FTSE 100 and growing international interest in UK listings. “Two years ago, some said the City’s best days were behind it,” she will say. “They were wrong.”
Jamie Young
Jamie is Senior Reporter at Business Matters, bringing over a decade of experience in UK SME business reporting.
Jamie holds a degree in Business Administration and regularly participates in industry conferences and workshops.
When not reporting on the latest business developments, Jamie is passionate about mentoring up-and-coming journalists and entrepreneurs to inspire the next generation of business leaders.