The UK could claw back pension tax breaks from asset managers that fail to invest enough domestically, the head of the British Business Bank said in a warning about the stakes for the industry as the government pursues a key growth initiative.

Louis Taylor, effectively a government official in his role as chief executive of the state-owned lender, insisted that he was not endorsing the idea but pointing out how the government can boost funding for growth-enhancing projects at no cost to taxpayers and without resorting to full compulsion. The industry prefers Australian-style tax reliefs to incentivize investment.