Time to let private credit fund public growth

Escape from low-growth trap

By James Mungovan, Chief Executive Officer, Europe, Equities First Holdings

10 June 2025

Tariffs were promised on ‘Liberation Day’ but the scale and breadth of US President Donald Trump’s levies on allies and adversaries alike surprised everyone – as the market reaction made clear.

Thanks in part to Prime Minister Keir Starmer’s diplomacy, the UK has got off relatively lightly.

But the fact remains there will be economic implications for Britain, which was already struggling to free itself from an era of lethargic growth and declining productivity since the global financial crisis.

Escaping from the low-growth trap demands a broader set of solutions than the Labour government has so far fully embraced.

It will not be enough in today’s uncertain global climate to simply seek to make it easier to build houses or smooth the way for major infrastructure projects like the expansion of Heathrow Airport.

Promoting better access to credit from all sources – not just banks – will be a critical part of the solution given the government cannot count on a return to low interest rates to kickstart the economy while inflation remains sticky.

The figures show why solving this problem is essential.

The Office for National Statistics says UK real GDP growth was zero in Q3 2024 and just 0.1% in Q4. It came in at 0.7% in Q1 2025.

The government also spent £4.3bn servicing its own debt in March, £1.3bn more than a year earlier and a high for March since records began in 1997.

Yes, mortgage rates have started to fall but many homeowners are still facing dramatically higher resets as they come off deals that were struck several years ago, and businesses are having a tougher time accessing credit. Tariffs may just exacerbate this further.

Attempts are being made to encourage better access to private credit. For example, the UK government has floated reforms to the financial sector that could stimulate the flow of credit. That includes an overhaul of how occupational pension schemes might be able to invest their surplus funds, which could release billions of pounds for investment into public and private markets.

But many of these solutions are complex and too difficult to implement. That is why it is critical they are not allowed to replace efforts to unlock more private capital for investment in growth.

The government has confirmed a trading platform for private shares, the Private Intermittent Securities and Capital Exchange System (PISCES). A measure like this will provide a new source of liquidity, especially for the kinds of companies that any economic growth agenda should be looking to support.

But we must go further. Private credit, including alternative lending backed by real assets and other forms of collateral, offers a broad array of options for businesses and individuals looking for funding that meets their needs.

Non-bank lending now accounts for about 50% of business debt financing in Europe. The private credit universe is also getting broader, with a wider range of capital providers supporting different types of investments.

Globally, private credit funds manage US$1.7trn, with continued growth set to take that figure to US$2.6trn by 2029.

According to data from Preqin, private debt assets under management in the UK rose from less than $16bn in 2008 to nearly $260bn in 2023. That is an impressive trajectory – but more must be done to expand this source of financing.

We are starting to see this happen – over the past few months, asset managers have been increasingly getting regulatory approval for dedicated private credit strategies that use the UK’s long-term asset fund structure, which was designed to house illiquid investments. Some are becoming available to defined contribution pension schemes.

Financing landmark infrastructure projects and encouraging investment in public equity markets always generates a lot of headlines. But policymakers and investors would do well to pay attention to the opportunities elsewhere.

While an uncertain and volatile world continues to play havoc with public markets, their private cousins may hold the key to unlocking the growth that the UK so desperately needs.

This article was first published in the Investment Week, Opinion section, on 28 May 2025.

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