Policymakers urged to grab golden alternative to make UK monetary companies sector extra aggressive – London Enterprise Information

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In a new report released today, UK leaders and financial regulators have been urged to focus on innovation and competitiveness to ensure UK financial services continue to benefit clients and consumers around the world, while enhancing the sector’s ability to fund growth across the globe strengthen economy.

The new State of the Sector Report – a world first – has been developed in collaboration between HM Treasury and the City of London Corporation. It provides a robust, evidence-based assessment of the competitiveness of UK financial services, drawing on both independent metrics and extensive industry consultation. It will be repeated annually and will be a mechanism that will help improve competitiveness year after year.

The report – which provides an important recommendation from Lord Hill’s UK Listing Review – shows where the UK is leading the world and what steps have been taken so far to improve the overall environment for the sector. He also stresses that regulatory flexibility should not lead to a “race to the bottom” but instead identifies areas for further reform and opportunities to improve competitiveness.

These include:

  • Talent: The UK is a leading global financial center due to its access to an unrivaled pool of expertise, talent and skills. We need to ensure the UK remains an attractive destination for global talent by considering a route that would allow international workers to enter the UK for short-term, productive work without a visa.
  • Innovation: The UK is a world-leading fintech hub. More than half of its unicorns are fintech companies – a higher proportion than in any other financial center. But it needs to develop expertise in digital skills. The financial services sector can complement government efforts through industrial and educational partnerships.
  • Regulation: The UK is recognized as the world’s preferred regulatory system for financial services. But the UK regulatory framework needs to remain agile, coherent and competitive while delivering better outcomes. Including the aim to reduce processing times for Financial Conduct Authority (FCA) approvals.

The report also identifies a number of other opportunities that will be key to the continued competitiveness of UK financial services. These include:

  • Providing different ways for employers to pay the Immigration Skills Charge and allowing medium-sized employers to pay the same fees that currently apply to small employers.
  • Promotion and investment in training. Skills need to be developed across the sector – in companies, regulators and governments – to provide better products and services and to get oversight, regulation and policy making right.
  • Supporting new ways of working to open the financial services sector to a broader and more diverse talent pool. Government can explore the benefits of cross-border remote work, which could offer companies an even broader talent pool and position and promote the UK as a truly open and global market.
  • Establishing and following clear principles and strategies for regulatory reform. As a result, the UK will remain aligned with global standards while introducing regulation more tailored to its domestic markets. The reform of Solvency II, the implementation of Basel 3.1 and the future of UK clearing activities will be defining moments for the UK to demonstrate its approach.
  • A clear commitment to set out how the FCA and the Prudential Regulation Authority will achieve their new secondary goals for growth and competitiveness and monitor progress. For example, they could make comparisons with regulators in other jurisdictions like the Monetary Authority of Singapore and run more promotional activities.
  • Maintaining and improving the UK’s open approach to market access. This can be achieved through bilateral and multilateral mechanisms such as trade agreements, mutual recognition agreements, regulatory cooperation and through the regulation of foreign company branches in the UK and through the UK Deference Framework. This could build on the respected Overseas Person Exclusion (OPE) in a way consistent with maintaining market integrity and financial stability.

The figures in the report show the UK’s strength in financial services, but also areas of competitiveness that could be improved:

  • The UK’s international financial reach remains unmatched. In 2020, the UK financial services trade surplus rose 8% yoy to £63 billion amid a challenging year. This surplus was higher than US net exports of financial services and higher than the value of the surpluses of France, Singapore, Germany and Hong Kong combined.
  • Amid proposed changes to the UK listing regime, the London Stock Exchange (LSE) saw a surge in the number and value of IPOs in 2021.
  • From 2004 to 2019, the UK’s volume of global forex trading more than quadrupled, going from twice the size of the US to nearly three times the size.
  • The UK accounts for the largest share of international bank lending and borrowing. This shows the UK’s global connectivity and capital flow. But between 2018 and 2021, the UK market share fell from 17% to 15%, while France’s market share rose from 9% to 13%.
  • The UK is Europe’s largest and the world’s second largest wealth management hub, managing £11 trillion in wealth in 2020. However, the UK’s global market share remained stable between 2019 and 2020, while the US’s share increased.
  • The UK has seen strong growth in private equity and venture capital investments. In 2021, UK financial services firms secured £37.5bn in PE and VC funding. This represents growth of 48% year-on-year and was more funding than companies in Singapore (£7.7bn), Germany (£5.8bn) and France (£5bn) but less than in the United States US (£111bn). .

City of London Corporation Policy Chairman Chris Hayward said: “Financial and professional services are an asset to the UK. The sector fuels growth, supports investment and provides more than 2.3 million jobs across the country – two-thirds of them outside London.

“This new annual report underscores the UK’s many strengths as a leading global financial center but, more importantly, highlights areas where action needs to be taken to improve our competitiveness.

“Taking advantage of these opportunities will not only benefit the sector but also the future prosperity of the UK economy as a whole. This includes the consistent implementation of the new competition target for regulators in the Financial Services and Markets Bill. We look forward to working with the UK Government and all parts of the sector to make this vision a reality.”