Local investment: connecting UK equity returns to the people and places you serve

As with any investment, your capital is at risk.

 

A van pulls up outside a Howdens trade depot on a chilly February morning. The shutters are half up. The lights are on. Inside, orders are being checked, and vans are being loaded.

Above the entrance door, for all to see, is the depot manager’s name. It’s a small detail that signals both the individual’s pride and responsibility in their job and the kind of everyday local prosperity that rarely gets celebrated.

 

Investing locally – and nationally

That’s maybe because local authorities have tended to approach ‘local investment’ aims in terms of geography: is the asset in my authority area?

But if the ultimate goal of local government pension scheme (LGPS) investors is to improve their members’ lives, then why restrict the opportunity set in this way? Why not invest in the UK’s best listed growth businesses – companies that drive economic growth at a national and local level?

When we select investments for our Great British Growth portfolio, we look for companies that deliver for shareholders, as Baillie Gifford’s other UK equities strategies do, analysing potential investments in terms of their edge, management alignment, growth prospects, valuation and risks.

But Great British Growth also asks an additional question of growing businesses: how does this growth support the UK economy and national prosperity? And, in doing so, how does this growth deliver for communities?

To this end, we look for Investments that can have a multiplier effect, rippling through supply chains and the local and national economy in tangible ways. The resulting growth, driven by the companies in our portfolio, is felt locally in terms of:

• hiring and training people
• commissioning suppliers and contractors
• improving local services and the built environment
• generating growth in the local economy
• supporting the national economic growth we need to pay for public services

 

How our portfolio supports UK growth

Investing nationally can still deliver locally. If you own the right public businesses, their success will show up across postcodes and communities, including your own, through jobs, skills and investment. Global growth can create local and national prosperity.

 

A balanced approach to local investment

The Scottish and UK governments’ focus on ‘local’ and ‘productive’ investment has so far largely been translated into investment in private markets, such as local infrastructure, housing, private equity, and private debt.

These can be highly targeted, visible and impactful, making it easier to establish their local connection. But private investments have drawbacks. They can also be illiquid, governance-heavy and expensive, with a finite pipeline of suitable projects.

If authorities allocate all of their local investment to private markets, there’s a risk of running out of good opportunities before the job is done. So you need to consider where else to look for comparable benefits.

UK public equities can offer those benefits, alongside diversified exposure, daily liquidity, transparency and strong market regulation. From there, it’s about finding those companies whose growth can aid better local and national outcomes.

 

Howdens: a growth story you can see on the ground

Howdens Joinery is a prime example of a business that we think ticks the boxes.

It manufactures almost half of the products it sells, and its scale enables it to sell skirting boards at lower prices than anyone else in the UK. And so, where its competitors are struggling to break even, it earns good margins.

The company has a thirst for growth. It is constantly expanding and reinvesting the profits from this cost advantage into the range of products it makes in the UK. The result of its sustained capital investment is over £100m a year invested into productive capital in the UK.

The local footprint is also easy to see. Howdens has over 850 depots across the UK, with managers often promoted from within. Profit sharing and an entrepreneurial culture reward teams for improving and growing their depots.

Headline figures such as “over 12,000 employees” and “over 600 apprentices” translate into careers, training and upward mobility. These are the building blocks of local prosperity.

Since Baillie Gifford’s UK team first bought the shares in 2014, they have returned 273 per cent. But alongside this, the business has deployed over £800m into the UK economy and created over 5,000 jobs. And, crucially for the investment case, we believe Howdens can repeat this over the next decade.

 

Great British Growth: surfacing local investments

A single company story is not a strategy. Local authorities need to demonstrate a portfolio in which the connection between growth and real-world outcomes is consistent and explainable in a local context to pension scheme members.

That is the intent behind Great British Growth: look for companies whose growth prospects are exceptional, and hold them for the long-term as the benefits of that future growth accrue across the UK economy.

That’s why we ask that extra question: where will the benefits of that future growth accrue? Some UK-listed firms can be great investments, but if future growth mostly flows overseas, capital aimed at both returns and UK prosperity may be better deployed elsewhere.

This is also where ownership matters. When the domestic shareholder base weakens, centres of gravity can shift overseas, and with them the benefits of future growth.

Patient, long-term shareholders, epitomised by the LGPS, can support management teams that invest for the long run, rather than optimising for near-term cash extraction.

 

Justifying your local investment budget

To use public equities credibly within a local investment budget, the approach must be rigorous and repeatable.

There is no single metric or passive index that can do this for you; it takes fundamental research.

Great British Growth’s framework can be summarised as “two bubbles, six levers” that create a set of forward-looking hypotheses that tie our expectations for the growth of the company directly to real-world outcomes that you can explain to stakeholders:

Productive investment focuses on UK capital expenditure and UK research & development. Is the company’s growth going to lead to it investing in a way that expands the capacity of the economy through capital expenditure and R&D right here in the UK, with all that means in terms of growth, tax, and money for services?

The national prosperity factors consider how else that investment is showing up in your communities, through jobs and wages, skills and careers that can transform futures, exports that bring wealth into the country, or as a UK growth multiplier whose success catalyses growth in its industry, region, or supply chain.

Based on these, we estimate that the economic touchpoints created by companies in the Great British Growth portfolio include:

• £2.8bn of UK capital expenditure per year
• 10,000 new jobs expected per year
• 200,000 jobs supported

These are estimates, not guarantees, but they illustrate what is possible when you focus on growth that is economically anchored in the UK.

 

Where this fits

UK public equities don’t replace private markets, they complement them.

Private markets can help meet specific, hyperlocal goals. UK equities, actively invested, can deliver broader benefits at scale and can be resized as circumstances change.

Together, they support a coherent local investment budget: disciplined about long-term returns, with a clear line of sight from company growth to community growth.

That’s tangible evidence your stakeholders can see: capital put to work growing pensions and the economy, improving lives, and strengthening the places your members call home.

Which brings us back to the name above the Howdens depot door. A pension fund’s first duty is to pay pensions, decade after decade. But it can do more.

With the right businesses, the benefits of success can be felt beyond the portfolio: names above doors, apprentices learning from experienced colleagues, and investment flowing into factories, labs and supply chains across the UK.

 

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Important information

The views expressed should not be considered as advice or a recommendation to buy, sell or hold a particular investment. They reflect opinion and should not be taken as statements of fact nor should any reliance be placed on them when making investment decisions.

This communication was produced and approved in March 2026 and has not been updated subsequently. It represents views held at the time of writing and may not reflect current thinking.

Potential for Profit and Loss 
All investment strategies have the potential for profit and loss, your or your clients’ capital may be at risk. Past performance is not a guide to future returns.

This communication contains information on investments which does not constitute independent research. Accordingly, it is not subject to the protections afforded to independent research, but is classified as advertising under Art 68 of the Financial Services Act (‘FinSA’) and Baillie Gifford and its staff may have dealt in the investments concerned.

All information is sourced from Baillie Gifford & Co and is current unless otherwise stated. 

The images used in this communication are for illustrative purposes only.

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