Rachel Reeves will this week announce plans to unlock tens of billions of pounds from corporate pension schemes as part of government plans to kickstart economic growth.

Sky News has learnt that the chancellor will use a crucial speech on Wednesday to disclose that she wants to use so-called surplus release to boost investment in the economy.

Government sources said it could unlock more than £60bn of pension surpluses held in defined benefit (DB) schemes, while other estimates suggested the figure could be in the region of £100bn.

The surplus release plan could be included in a pension schemes bill expected to be published in the coming months.

City sources said that a meeting had taken place earlier this month which was attended by Treasury officials, members of the Number 10 Policy Unit and representatives of the 100 Group of FTSE-100 company finance chiefs.

The meeting, which was hosted by Varun Chandra, Sir Keir Starmer’s top business adviser, discussed the surplus release plan in detail, according to one finance director briefed on the talks.

Ms Reeves’s move will form part of a wider set of pensions reforms initiated under the last government and now being accelerated by Labour.

These include forcing the merger of local government pension schemes, which collectively hold about £400bn of assets.

In her maiden Mansion House speech in November, the chancellor said she would preside over “the biggest set of reforms to the pensions market in decades to unlock tens of billions of pounds of investment in business and infrastructure, boost people’s savings in retirement and drive economic growth so we can make every part of Britain better off”.

An overhaul of defined contribution (DC) schemes, which in aggregate manage £500bn in assets, is also on the cards, with consolidation there also anticipated in the coming years.

The Treasury has cited Australia and Canada as examples of the model Britain’s pensions system should seek to emulate, with both countries utilising pension scheme capital to invest more heavily in domestic infrastructure.

The surplus release plan has the potential to be a major catalyst for economic investment, although it was unclear this weekend how the deployment of this capital into UK growth initiatives would be guaranteed.

It was also unclear the extent to which pension trustees would play a role in any surplus release plans.

Read more:
WH Smith in secret talks to sell historic high street arm
Reeves ‘happy to look’ at joining tariff-free trading scheme with Europe

The pensions industry has been pushing for surplus release to be adopted in Britain for years, with the Pensions and Lifetime Savings Association having endorsed such a move before last year’s election.

Edi Truell, the prominent financier and pensions entrepreneur, said on Sunday: “It is time to split DB pension funds from their employers.

“The employers should be focussing on their core business; and the pension funds be backed by capital from specialist pension superfund managers.”

“The Pensions Regulator needs to replace its misguided views of “risk” and recognise that investment in productive assets in the long term provides better pension outcomes.”

Ms Reeves’s speech on Wednesday will come at a critical time for her, with doubts having been raised about her grip on her job for the first time in recent weeks amid financial market volatility in the aftermath of her October Budget.

Speaking at the World Economic Forum in Davos last week, Ms Reeves indicated that she would row back from a number of Budget measures, including relating to the treatment of non-doms.

Having been repeatedly accused of talking down the economy in the wake of Labour’s landslide general election victory, she said this weekend that she wanted Britain to be less “polite” about championing its economic virtues.

The chancellor has also formed a pivotal part of the government’s move to shake up economic regulation, with the removal last week of the chairman of the Competition and Markets Authority.

Sky News revealed several weeks ago that Sir Keir had written to watchdogs to urge them to remove barriers to growth, with meetings between the chancellor and regulators set to continue in the coming weeks.

The chancellor’s speech this week is expected to confirm government support for major infrastructure projects, including – controversially – a third runway at London Heathrow Airport.

The Treasury declined to comment on Sunday on the contents of the chancellor’s growth speech.

There has been an “unprecedented” rise in the number of businesses on the brink of insolvency, according to a closely-watched report.

The latest Red Flag Alert report by Begbies Traynor, an insolvency specialist, showed those in critical financial distress rose by 50% in the three months to December compared to June-August.

It said that 46,583 businesses were clinging on with consumer-facing firms, such as hospitality businesses, bearing the brunt of the deterioration.

Money latest: Top ten most memorable ad slogans revealed

It added that there were “notable” increases in financial stress across 21 of the 22 sectors of the economy that the study covered.

The report pointed to pressures on many fronts from rising energy costs, budget tax measures, high interest rates and weak consumer demand.

The report was released as a key measure of the latter, released once a month by GfK, showed consumer confidence at its lowest level since December 2023.

All five of the survey’s components, including the outlook for personal finances and the economy, declined.

The findings of both reports chime with a slew of downbeat economic signals since Labour’s election victory, with stagnation taking hold on a quarterly basis.

Chancellor Rachel Reeves warned in late July of a tough budget ahead to plug a £22bn “black hole” in the public finances that a Treasury review was said to have uncovered.

The budget is set to raise taxes on businesses, from April, by £25bn to help increase funding for investment and public services but firms argue the financial hit will just result in lower investment, higher prices, and job losses across the board.

Julie Palmer, partner at Begbies Traynor, said of the Red Flag Alert’s findings: “Across nearly every sector, there has been a unprecedented level of growth in the number of firms who are at serious risk of entering insolvency in the next 12 months.

“The fact that the distress is being felt across almost every corner of the economy highlights how difficult the outlook is for UK businesses right now.

“After a disappointing Christmas, consumer-facing industries, in particular, are feeling the strain, with rising operational costs and higher wages adding to an already difficult situation.

“With many such businesses already operating on thin margins, I fear the current situation will undoubtedly push some over the edge.

Read more:
UK’s biggest mortgage lender sees three rate cuts this year
Economy faces four years of budget pain, Brewdog co-founder warns
Sainsbury’s to cut over 3,000 jobs

“Indeed, at a time when consumer confidence is so volatile and borrowing costs look likely to be structurally higher for the foreseeable future, the situation feels very precarious.

“Sadly, this has only been exacerbated by the tax rises and increase in national minimum wage levied on businesses during the October 2024 UK budget which means the financial strain on businesses will only increase later this year.”

The government has consistently defended the budget, saying it will lay the foundations for growth that the country so badly needs.

Public investment is forecast, by economists, to help output pick up in the second half of the year.

However, many caution that the response by businesses to the budget will also be crucial.

For three days Donald Trump dominated Davos from a distance.

On the fourth, he did it in person, albeit virtually, with a speech that took his threats of economic conflict with Europe directly to its political leaders.

Beamed from the White House to the World Economic Forum, he delivered a message of total confidence in American might, and a direct challenge to those that do not play along.

Money blog: Could Santander really walk away from UK?

Initially, he stuck to the inauguration script and his domestic program but, teed up by a question from his Mar-a-Lago neighbour and former adviser Stephen Schwarzman, co-founder of the Blackstone Group, he let rip.

Mr Schwarzman identified a theme of this week, frustration at EU regulation among businesses, and the president took full advantage.

He criticised taxes on American companies, and what he sees as a trade imbalance. “They don’t take our food, they don’t take our cars, but they send us cars by the million.”

EU demands for $15bn in back taxes from Apple, as well as investigations into Google and Facebook, were also slammed. “These companies, like them or not, these are American companies.

“Nobody’s happy with it and we are going to do something about it. I’m trying to be constructive, I love Europe, but they treat the US very unfairly.”

Read more from Sky News:
Chancellor’s Heathrow third runway hint
Trump has everyone in Davos guessing

His counter-offer to the businesses listening; corporation tax of just 15% for companies that shift their manufacturing to the US, and tariffs for those that don’t, a position that would inevitably bring retaliation.

In the audience, the heads of the European Central Bank, the World Trade Association, the International Money Fund and sundry cabinet ministers and central bankers, shifted in their seats.

As if to emphasise what Europe is up against, Mr Trump cited a $600bn investment promised by Saudi Arabia’s Crown Prince Mohammed bin Salman, and suggested “he round it up to a trillion”.

Having parked metaphorical tanks on chancellery lawns, he offered some hope, but not detail, on how he might address the real ones rolling across Ukraine.

Referring to “millions of dead bodies lying on the flat fields” he said efforts to secure peace “should be under way”. Asked when that might happen, he said the answer lay with Russia. “Ukraine is ready.”

Having started the week guessing what Trump 2.0 might mean, Davos’ delegates, that unique mix of money, power, civil society and celebrity, leave the Alps under no illusion of the disruption ahead.