Expanding the UK government’s expertise in corporate finance

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The Treasury UK Government Investments branch is an advisory body that deploys expertise in finance, governance, law, accounting and education based on public and private sector experience, to advise government departments on complex aspects of corporate finance , governance, realization of assets and, more recently, contingent liabilities. CEO Charles Donald talks about his job

After spending more than 30 years in investment banking, Charles Donald took on a new challenge in 2018. The Vice President and Head of UK Advisory and Corporate Broking from Credit Suisse has joined UK Government Investments (UKGI). UKGI was created as a 100% subsidiary of HM Treasury in 2016, to combine the functions of executive shareholder and UK Financial Investments (UKFI). He works across government departments and with the private and public sectors, advising on complex business tasks.

Upon arrival, Donald assumed the role of head of his group of financial institutions. Less than two years later, he was promoted to Managing Director of UKGI, succeeding Interim CEO Justin Manson, who also had an investment banking background. Mark Russell had been the former boss for seven years, until he stepped down in October 2019 to become chairman of the Department of Defense purchasing agency, Defense Equipment and Support.

However, just five days after Donald was due to start his new role, the UK was plunged into (what is now known as) Lockdown 1.0.

“To be honest, I don’t feel like I’ve really had the chance to do the job of CEO in a normal environment yet,” he says. “But I have the advantage of being at UKGI since May 2018, so I knew the organization and the people, and had learned a lot about how to work in government.”

Prior to joining Credit Suisse in 2009, Donald was Head of UK Investment Banking at Nomura. Previously, he was in charge of equity research and then corporate brokerage at Lehman Brothers. Prior to that, he held positions at Donaldson, Lufkin & Jenrette and UBS.

“When I joined UKGI it was a big culture change. After more than 30 years in banking, I thought it would be interesting to do something a little different. The public sector, public policies and government have always interested me.

Donald says the combination of private sector and public service backgrounds goes through the more than 130 employees who work at UKGI. “We are working hard to combine these two skills, so that we can provide the best advice to ministries. We second people from those two ridings on a near-perpetual basis, to blend the experience of the staff. ”

Private sector staff are trained in banking, consulting and law firms, and there are also accountants with ACA degrees. In addition to consulting and recruitment, there are secondments from large consulting firms. This is followed by experienced professionals in the Treasury, the Department of Education, the Department of Business, Energy and Industrial Strategy (BEIS), the Cabinet Office and the Ministry of Justice.

“The advice we give on corporate finance or governance has to be solid, of course. But it also needs to be communicated so that the government can make the best use of it, ”Donald said. For those steeped in the private sector, this is probably more akin to having industry specialists work alongside financial experts.

Key workers

The UKGI team works in three main areas: corporate finance; corporate governance; and heritage achievements. UKGI is also in the process of establishing a fourth discipline, to advise the government on contingent liabilities. “This ties into its balance sheet review work, to help the government inform its risk management and contingency planning – exposure on a contract that it has, or there may be exposure on a. contract that the government has, or residual exposure as a security guarantor, ”says Donald. This new group was announced during the expenditure review in November 2020. This team will consist of a director, with secondments to the team, to ensure the same blended approach.

UKGI has helped the government assess the economic and fiscal risk resulting from COVID-19, as well as the risks and impact of some of the measures taken last year – some of which continued into 2021. It supported the Treasury with resources to help with the work he was doing under the Bank of England commercial paper – the Covid Corporate Finance Facility. The British Business Bank, of which UKGI director Ceri Smith sits on the board, saw its role expand considerably during the crisis.

During the November expenditure review, the government announced increased resources to manage the complex assets that may well be acquired as a result of a pandemic response. For example, the Treasury set up a Credit Advisory Board to advise on potential financial interventions, and UKGI contributed to this exercise.

“The work on the various assets that we have reviewed with various departments over the past 12 months has a significant element of corporate finance,” says Donald. UKGI worked with the Treasury on an intervention in June 2020 – the £ 30million bailout for Celsa Steel, the South Wales-based steel company.

A new asset that UKGI will take care of is OneWeb. In July 2020, the government invested $ 500million (£ 364million) in the low-earth orbit satellite operator. OneWeb is based in the United Kingdom, but has significant operations in the United States. He had filed for Chapter 11 bankruptcy in the United States in March 2020. The government’s offer (completed in November 2020) was part of a consortium, with Indian billionaire Sunil Bharti Mittal also investing $ 500 million. of dollars. OneWeb plans to build low-latency, high-speed internet service by 2022, but it will face stiff competition from other companies led by SpaceX’s Elon Musk and Amazon’s Jeff Bezos. Neil Masterson, former Co-COO of Thomson Reuters, took over as Managing Director.

“How long to hold investments and how to think differently about them is a political decision of the government,” says Donald. “One thing we always say about UKGI is that we don’t do politics, we act as a function. The government decides the policy, and then we provide advice in support of the policy, whatever it is. So if the government decides it’s going to have a long term grip, or an independent body with a long term role, then we can work on that basis. If it is short term, we work on a short term basis. It’s a difference from my previous job, where overall decision making was at the heart of it. “

About the article

Read the full article of the May 2021 edition of Corporate Financier. Exclusively for Corporate Finance Faculty Members and Online Faculty Members who can access our highly regarded magazine and extensive archive presented by ICAEW Corporate Finance Faculty.

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