AI and Creative Technologies (Communications and Digital Committee Report)

Lord Massey of Hampstead Excerpts

Friday 13th June 2025 Lords Chamber

[Lord Massey of Hampstead (Con) (Maiden Speech)]

My Lords, it is an honour and a privilege to be making my maiden speech in this House on this important issue affecting our country and, indeed, the growth agenda of the Government. I begin by extending my thanks to Black Rod, the Clerk of the Parliaments and the doorkeepers, who have eased my entry into this House with a combination of helpfulness, friendliness and great professionalism. I also thank my two supporters, my noble friend Lord Harrington, who was at university with me and has been a great friend ever since, and my noble friend Lord Polak, with whom I have enjoyed two decades of happy collaboration at CFI.

As a Hampstead-born lad, I have always remembered that my grandparents fled Odesa and found refuge in this great country. I met my Venetian wife, Fiorella, at 15 years of age at school here in London. We have been happily married for over 40 years and have three wonderful children, Lucie, Edward and Eloise. I arrive in this House as a lifelong Conservative, having started my political journey in the summer of 1978 as a research assistant to Peter Walker, later Lord Walker of Worcester, who many in this House I am sure will remember. Some 44 years later, I had the privilege of serving as the chief executive of the Conservative Party under the leadership of Rishi Sunak and Kemi Badenoch. I am honoured now to become a parliamentarian amongst you and look forward to making my contribution and serving the vital work of this House.

In parallel to my political interests, I have been involved in the financial services sector for over four decades, working in fund management and capital markets. I worked at a large global financial institution for 20 years, but subsequently founded a smaller financial firm, so—unusually perhaps—I have led businesses at both ends of the scale in terms of the size of the companies. My experience as a business owner and entrepreneur has taught me to recognise the importance of smaller companies, and I am keenly aware of the challenges that they face. I declare my interest as a director and shareholder in financial services companies, as stated in the register.

The current debate on how to scale AI and other creative British technology firms is indeed critical to the future of this country, as other noble Lords have said. As the study says, if we do not play to win, we risk becoming also-rans, which could damage our long-term growth prospects. The committee, under the chairmanship of my noble friend Lady Stowell, has done an excellent job in collating all the evidence and articulating a clear set of recommendations. Given my current roles as chairman of a small capitalisation asset manager—an asset manager of small companies—and chairman of a capital markets firm specialising in AIM, the junior market of the London Stock Exchange, I want to focus on two of the recommendations: accelerating financial reforms and championing entrepreneurial success, as my noble friend mentioned.

Tech firms in the UK are experiencing real difficulties in accessing capital from our public markets. The first issue, I am afraid to say, is one of increasing regulation that has beset our industry since the crisis of 2008. The FCA, like the rest of the Civil Service, has grown extensively since then, and its rulebook now extends to over 10,000 pages. Since 2022, the number of employees has expanded by over 30%, from 3,800 to 5,000, a growth rate which greatly exceeds the growth of the industry it regulates. Leaving aside the huge costs of regulation, the role of the regulator, while well intentioned, has had a suffocating effect on the industry, particularly on smaller companies, which constitute the engine room for AI and creative tech.

An example of this suffocation is the story of the decline of equity research over the last decade. One of the many legitimate complaints of the tech sector is that there are now few analysts covering small cap companies on AIM. They are right, as the evidence shows that for companies of under £500 million, there are four analysts covering a single company in the US but only one in the UK. This lack of research has a direct bearing on private and institutional demand for these equities and is the result of an EU rule brought in in 2014, as some noble Lords may recall, called MiFID II. This was designed to protect retail clients and provide transparency for institutions, but it has instead rendered much equity research uneconomic. This leaves the private sector less informed on public companies and reliant on the internet or non-independent research. The irony here is that the intention was to protect private investors from research that they might not understand, but in practice the result is a dearth of research and consequently less investment in the sector.

This needs a total rethink. The chief executive of the London Stock Exchange, Dame Julia Hoggett, put the situation very well:

“We also need to rebuild our risk culture in the UK. Since the financial crisis, UK markets have become known for their focus on managing downside risks—often for good reason. But taking an appropriate amount of informed and rewarded risk is an inherent part of well-functioning and liquid capital markets”.


Somehow, we need to reintroduce this culture into our country.

One of the side-effects of this risk-averse culture is, of course, that as a country we fail to eat our own cooking. While US pension funds invest 40% of their assets in domestic equities, the comparable figure for the UK is only 4%. The argument that the UK constitutes only 3% of the world’s index simply does not wash. Australia, for example, invests 24% of its pension assets in its domestic markets, yet it represents only 1.5% of the world index. In order to restore the vibrancy of our markets, another vital step must be to actually invest in our own companies, both listed and unlisted, and the Government have been across this. They have followed up the Mansion House compact introduced by Jeremy Hunt with the Mansion House accord, and I welcome the announcement this week of the British Business Bank investing a further £2.5 billion a year in start-ups and scale-ups. This is indeed welcome news and will potentially get the ball rolling again, although clearly a huge gap still remains.

Another way of stimulating domestic demand for UK equities is to use the tax system to create incentives for investors and founders to deploy capital and stay the course in the medium to long run. The Government raise funds from private investors very successfully in the gilt market. One reason for this is that gilts and other sterling corporate bonds are exempt from capital gains tax. This has been highly effective and leads UK investors to prefer sterling bonds over other countries and other currencies. Why do we not do the same with AIM stocks?

My suggestion would be to introduce this after a holding period of, say, five years. This would incentivise entrepreneurs and investors to take a medium view and look to scale up in the UK. If the cost of this is too great, then tapering should be considered where the rate of CGT falls in line with extended holding periods. This measure would echo the capital gains tax regime introduced in 1998 by the Labour Government, where, after a holding period of only two years, capital gains fell to 10%. Indeed, this was the incentive that, in part, led me to leave my well-paid corporate job to found my boutique in 2004.

The other measure that has been mentioned is stamp duty at 0.5% charged on buying UK shares. It costs 0.5% to buy British Telecom, but not for Deutsche Telekom. Does this make sense when we want to promote UK equity ownership? It is time to act decisively and boldly if we are to arrest our relative decline. The opportunity is substantial and we are indeed getting on the front foot, but I urge the Government to focus on countering risk aversion among regulators and pension funds and to create incentives for entrepreneurs to start businesses that can be scaled and become significant in the UK.