Minister welcomes sovereign funds

The Treasury has signalled a softening of its stance toward sovereign wealth funds, less than two months after the Chancellor Alistair Darling joined other G7 leaders in a call for more regulation of the $2.2 trillion sector.

In a speech to the London Financial Markets Summit, Kitty Ussher, the Treasury's City minister, said: "I want to send a strong message that Britain is open for business to investors of all nationalities. We welcome sovereign wealth funds using London as a base to keep close to the world's financial markets... and London will continue to welcome commercial investment from around the world."

The declaration comes as the European Commission this week debates the imposition of new guidelines for how these funds should operate. Politicians in Europe and America have become worried about SWFs, the massive, state-controlled investment funds which have grown rapidly. Fuelled by bulging foreign exchange reserves and record oil prices, countries such as Qatar, Libya and Russia have set aside billions to invest abroad.

The UK has proved an attractive market for SWFs. Singapore's Temasek owns stakes in Barclays and Standard Chartered, while Qatar and Dubai between them own about a third of the London Stock Exchange.

Mr Darling has said in the past that the UK would not retreat into protectionism but that SWFs must "play by the rules." The Treasury went further yesterday, saying that it would "absolutely reject a move towards prescriptive regulation".