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UK government report on long-termism criticised for failure to offer definition

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The UK government has been criticised for an “incredible” oversight in failing to define long-term investment, despite publishing a report on the matter.

Con Keating, head of research at the BrightonRock Group, said a recent Department of Business, Innovation and Skills (BIS) report on the implementation of Kay Review recommendations had failed to establish even theoretical parameters for what constituted long-term investment, nor had interviewees in the report touched on the matter.

“One way of definening long term is in terms of the flows of liquidity arising from the securities held, their coupons, dividends and maturing proceeds,” Keating wrote in the Guest Viewpoint in January’s issue of IPE.

“When these, rather than changes in market price, dominate investment returns, we are in the long term,” he said.

Keating criticised that the BIS report discussed matters of market liquidity and earnings guidance, but did not offer a frame for what constituted long-termism.

He also said it put forward an inconsistent view on dividend payments, as it supported he payment of dividends as a means of preventing empire building, despite also arguing that dividend payments must not prevent a firm’s growth.

Keating said he regarded as “bizarre” a suggestion that those who divest from companies should be interviewed on their reasons.

“Quite apart from the sheer impracticality, it is motivated by concerns with share price performance – short-termism writ large.”

To read the full Guest Viewpoint, see the current issue of IPE

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