Bim Afolami: If necessary, the UK must take an aggressive approach on financial services in Brexit talks
The interests of the financial services sector must be a top priority as Britain negotiates a new relationship with the European Union, writes Bim Afolami
Financial services matter to the UK. Not just for London, not just for the South East, but for the whole country. We need to ensure that as we leave the European Union, we maintain our world leading position.
Last year the banking sector alone brought in £28.5bn in tax revenue, the highest amount on record. But it is not just about providing more revenue. Studies have shown that more financial service jobs have a direct impact on regional productivity across all sectors.
The average output per worker in a British city was £58,900 a year in 2016. For workers in financial services, output was almost twice that at £114,700. Why does that matter? Financial services service the areas of the ‘real’ economy. From straightforward bank loans to derivative instruments, they are essential to all types of business, large and small.
It is important to remember that financial services are not just a London centric industry. In fact, only half of financial services economic output is from London, with the North of England housing 13 per cent of the industry at a value of £15.3bn for the region. This must be built upon, and part of the Northern Powerhouse strategy could be making Northern cities such as Newcastle and Manchester financial services hub at the level we currently see in London and Edinburgh.
Over 1 million people are currently employed in financial services. However, once we implement our new immigration system, we need to continue to be open to the most talented people from all over the world, not just Europe. One way of doing this would be to introduce new ‘Opportunity Zones’ in some of the poorest areas in the UK. These would be places in which international investors could reinvest their capital gains into new capital projects rather than them being taxed.
Such tax incentives would benefit deprived areas by delivering significant improvements to the “real” economy – new businesses, buildings and housing; all underpinned by a thriving financial sector. Britain is uniquely placed to deliver such an ambitious idea, because of our deep expertise in capital markets, private equity and venture capital.
We need to make sure that the financial services sector is accessible and relevant to everyone. That does not just mean bankers and those working in the City of London, but people who need to rely on services such as credit unions. As Chair of the APPG on Credit Unions, I know the difficulties they are currently facing.
More credit unions than ever since 2010 closed down last year, even as the demand for them increased. Credit Unions provide a vital service for those with low credit scores who cannot use traditional banks and offer a welcome alternative to payday lenders. Part of promoting financial services must be working with HM Treasury on making it easier for credit unions to serve local communities.
All of this means that promoting the UK as a financial services hub is essential for the UK economy, and it provides fantastic careers for British people right across the UK, as well as helping to fund our vital public services. To preserve its position means protecting the interests of the sector in any future trade deals and ensuring people in every part of the United Kingdom can use and benefit from our world-class financial services.
To be blunt, if necessary we must take an aggressive approach to the EU in our upcoming trade negotiations if they choose to deliberately undermine the sector through tax breaks and regulatory manoeuvres. Financial services needs to be a top priority in those talks.
My Westminster Hall debate on Wednesday will highlight why doing so will not just be for the benefit of the City, it will be for the benefit of the whole UK.