Britain needs an additional £1 trillion ($1.3 trillion) in investment over the next decade to stimulate economic growth, according to a report released on Friday.

New Prime Minister Keir Starmer has set a goal of achieving 2.5% annual economic growth, a rate that the UK has not consistently reached since before the 2008 financial crisis. During his campaign leading up to the July 4 election, Starmer emphasized the importance of this growth target.

The report, from the UK financial services lobby group Capital Markets Industry Taskforce (CMIT), indicates that reaching a 3% annual growth rate would require an additional £100 billion of investment each year over the next decade, with a particular focus on energy, housing, and venture capital.

Nigel Wilson, the report’s lead author and former CEO of Legal & General, told Reuters that the required funds could be drawn from Britain’s £6 trillion in long-term capital within the pension and insurance sectors. "We’ve underinvested in the UK for a long time, and there’s a huge gap between us and other G7 countries," said Wilson. "We have the long-term capital, it just needs to be reallocated."

The report outlines that Britain requires an extra £50 billion annually in energy investments to meet net zero targets, £30 billion in housing, and £20-30 billion in venture capital. To encourage this investment, the government could consider incentives like reducing taxes on shares for retail investors.

A separate report by the think tank New Financial highlighted that UK pension funds allocate significantly less to domestic and unlisted equities compared to other developed markets. The report suggests that UK pensions could double their allocations and still align with global standards.

The UK government has already initiated a review of the pension system to boost domestic investment in startups. UK Pensions Minister Emma Reynolds remarked that pension schemes could play a much larger role in the UK capital markets. She pointed to the success of Canadian and Australian pension schemes in investing in growth companies, noting, "I am particularly keen to learn from them."