Britain’s biggest long-term savings and pensions provider is ramping up its investment in UK defence as the global economy confronts the most dangerous geopolitical backdrop since the Cold War.
Phoenix Group, which owns Standard Life, is expected to announce deals with a trio of British companies in the coming weeks in a major shot in the arm for the industry.
The FTSE 100 insurer, which has more than £280bn of assets under management and 12 million customers, also signalled it would plough hundreds of millions of pounds more into UK defence by the end of the decade.
Phoenix said it was in “active discussions” with a range of British defence companies, describing the sector as offering “attractive” returns in an era of heightened geopolitical tensions.
The cash injection could also pave the way for a new wave of investment in Britain’s defence industry, which has been stifled in recent years by strict environmental, social and governance (ESG) rules.
This has forced some funds to shun some of the biggest companies in the industry, including BAE Systems and QinetiQ.
Phoenix already invests in the bonds of BAE Systems, but it is understood that any new investment made by Phoenix will not involve companies that make weapons.
The money is expected to focus on artificial intelligence and cyber security, as well as drone technology aimed at boosting the country’s domestic and economic security.
Mike Eakins, chief investment officer at Phoenix, suggested Russia’s invasion of Ukraine had been a defining moment for the global economy.
He said: “The events of the past three years and continued geopolitical tension have demonstrated that energy security and robust defence are key components of economic resilience, which is required to mitigate the risk of inflationary shocks.
“As part of our diversified investment programme, we invest at scale within the energy and defence sectors, and see these early-stage growth companies as an opportunity to increase investment in these sectors.
“They represent attractive asset opportunities for capturing optimal returns, with tangible benefits to the UK’s energy security, defence, infrastructure and economic growth.”
Sir Keir Starmer warned earlier this week that the world was “more dangerous and volatile” than before, as he launched a “root and branch” review of the Armed Forces that he said would ensure Britain’s defences were fit for the future.
The review, which will be led by former Nato general secretary Lord Robertson, will examine a wide range of areas from recruitment to international co-operation agreements that are expected to strengthen ties between the UK and continental Europe
The Treasury and Britain’s investment industry have declared that funds which invest in UK companies making weapons are “ethical” and “sustainable”, in line with current ESG rules.
In April, the Treasury and the Investment Association, which represents asset managers who have more than £35bn invested in UK defence companies, said the industry was wholly ESG compatible.
However, institutions including the Church of England have boycotted defence firms on ethical grounds. The Church has severe restrictions on arms investments and its £3bn pension fund has shunned more than 80 companies in the sector.
Sir Keir has signalled that he will raise Britain’s defence spending to 2.5pc of gross domestic product (GDP), from the current Nato goal of 2pc.
However, the Conservatives have criticised the Prime Minister for refusing to put a date on when he will meet the target. Tory leader Rishi Sunak had promised to do so by 2030.
Last year, just 11 of the alliance’s 32 members, including the UK, managed to reach the target.
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