We need a long-term plan to make our financial services world-leading once again
The City of London (Alamy)
The failures of Silicon Valley Bank and Credit Suisse in recent weeks prompted unrest in the global banking sector. Such collapses show how quickly long-established financial institutions can be engulfed by crisis, and perhaps more importantly, the critical need for high regulatory standards.
Since 2008, both Labour and Conservative governments have worked with the regulators to ensure that London has strong safeguards in place to protect customers and businesses alike. In the intervening 15 years, our financial system has steadily grown without major incident.
Today, financial and professional services in the UK generate over £278bn in economic output annually, employing over 2.3 million people, two-thirds of whom are outside London. Financial services underpin every transaction and trade, pay every meal deal and mortgage, across every town and city in the country.
So we cannot afford to become complacent; maintaining confidence in our financial system must be a priority for the government, the regulators, and the sector alike.
In the City, we know that having world-leading standards is integral to our success. Standards underpin trust in our political system, in our rule of law, and in our economic ecosystem. This is why organisations invest in the City. High standards are, therefore, vital to sustainable growth; we cannot have one without the other, they are two sides of the same coin.
But strong regulation and confidence are only two of the three vital ingredients needed for success in financial services. The third is competitiveness.
London’s struggle to remain internationally competitive is a serious issue.
One that has seen several British companies, most notably success story, Arm, list in New York rather than London. This is a problem because we are sowing the seeds of success, only to have someone else reap the harvest.
London cannot rely on our past to guarantee our future. The government knows this. Last December, the Chancellor announced his Edinburgh Reforms to drive growth and competitiveness. Concurrently, the Financial Services and Markets Bill – a generational opportunity for legislative change – introduced competitiveness as a secondary objective for regulators.
But the problem with political solutions is that they are inherently short-term in their thinking.
Governments of all colours seldom have the bandwidth to look beyond the next year, let alone the next election cycle. Yet the challenges that our financial services sector faces are sizable, they are systemic, and they will take serious effort to fix. The solutions must therefore come from outside politics.
This week, the City of London Corporation – the governing body of London’s historic financial district – announced an ambitious initiative to provide long-term strategic direction for the financial services sector: Finance For Growth.
Partnering with senior industry leaders from Lloyd’s, Schroders, KPMG, and Glasswall to name a few, this will be the first comprehensive industry-wide review that encompasses all aspects of UK financial services. Our goal is simple: to help build the economy of tomorrow, today.
Covering everything from tax and talent to risk and regulation, Finance For Growth is a wide-ranging, bold and enduring vision for our economic future. We are focussing on four fundamental areas integral to financial services: tech and innovation, sustainable finance, competitive marketplace, and international trade.
Harnessing expertise from across the financial services sector, the Corporation is working collaboratively with a network of partners and trade associations to build a robust case for reform. We’ll speak with one voice on the challenges and opportunities to growth, and engage with politicians, regulators, and the sector on the best way forward.
Finance For Growth will report back in six months’ time with a roadmap for success, a path to prosperity for our economy for the months, years, and even decades to come.
Chris Hayward is Policy Chairman at the City of London Corporation.
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