PA ANALYSIS: Tackling share buybacks top priority for IA’s ambitious Action Plan

Set in motion last summer, the Investment Association’s long-awaited Productivity Action Plan aligns the funds world with the Chancellor’s grand plans to “fix the foundations” of the British economy.

PA ANALYSIS: Tackling share buybacks top priority for IA’s ambitious Action Plan

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Back in July, the government estimated matching the UK’s productivity with that of the US would raise GDP by 31%, equating to around £21,000 per annum for every household.

You can’t fault the ambition. It must make a welcome change for the IA to be focusing again on the big-picture goals rather than settling internal matters, whether that be the awkward resignation of former chief executive Daniel Godfrey in October, or its more recent restructure.

Osborne himself has also suffered his fair share of criticism following last week’s Budget, so it is vital for all to make sure the Action Plan gets underway quickly and without hiccups.

Without going too deeply into the IA’s five longwinded ‘investor productivity principles’, the basic plan is for fund managers working with listed companies to help them become more open and efficient and ultimately deliver better returns.

“We want those companies that are quoted to give more details in their report and accounts to give more details in terms of what they are actually doing, and being held more accountable,” says Trevor Green, a member of the steering committee and Aviva Investor’s head of UK equities.

“We are not telling them how to become more productive, but asking ‘can you give us some key performance indicators and we can monitor them and see how you are progressing?’ We want more granularity.”

Key to this is looking at how firm’s allocate capital and, in particular, a big concern for Green is the high degree of share buybacks of late, including the likes of BT, Ryanair and Next.

“We want companies to justify more if they are doing share buybacks – why are they doing that rather than further investment in the business,” he says.

“What the government wants is companies to spend less handing money back to shareholders and invest more in their businesses. We are not telling companies to do that but we want more discussion around the subject.”

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