Financial services op-ed from the Mayor of London
People who work in the UK’s financial services once believed that they could bank on a Conservative government. But they have been well and truly abandoned by the current one at the worst possible time.
With great fanfare, Prime Minister Boris Johnson celebrated the Brexit deal agreed before Christmas. But, incredibly, financial services — a sector worth £132bn a year to the UK and employing more than 1m people — has been neglected by a deal that is better for European exporters of goods to the UK than it is for its world-leading service sector. Exports of UK financial services are worth around £60bn, compared to £15bn worth of EU imports.
There is no getting around the fact that it was effectively a no-deal Brexit for finance, with the needs of the sector at the heart of the UK global competitiveness not only being overlooked, but barely being paid lip service by this government.
The establishment of a solid framework to support equivalence recognitions should have been central to our negotiations. So far, we only have equivalence for clearing houses — a necessity for the EU side so that they can avoid disruption. Chancellor Rishi Sunak has taken the necessary regulatory decisions to allow EU financial services to continue to do business in and with the UK across a range of areas, but he has only said that he is keen to “continue the conversation” with EU partners on their reciprocal decisions for UK businesses. These words provide cold comfort from a chancellor who ought to understand the certainty needed to underpin and expand a global financial centre.
The sidelining of financial services in the Brexit negotiations was no accident — it was a deliberate decision by a government that appears content to paint the sector as the concern of a “metropolitan liberal elite” in order to further promote an anti-London agenda. Risking the long-term success of a vital sector for short-term party-political advantage is deeply irresponsible.
For all the talk of “levelling up”, the antipathy shown to financial services will not just hurt London, but the whole country. It is a myth that only those who work in the Square Mile and Canary Wharf benefit from the sector. In reality, fewer than four in ten who work in financial services do so in Greater London. Nearly 100,000 jobs are in the North West, and 75,000 are in the Yorkshire and Humber region. Financial services are also crucial to serving the wider economy and they contribute billions in tax revenues to the Treasury every year, which goes towards funding public services in every village, town and city across the country.
What we need now are political leaders to champion the growth of the financial services sector — just as Mr Johnson did when he was London’s mayor, and just as I will continue to do. And we need growth to be built on solid, modern foundations — exploiting new opportunities in green finance, making the most of our well-deserved reputation as the international leader in fintech, and ensuring that venture capitalists continue investing in our country.
Britain’s history in financial services, its geographic position, language, appeal to global talent, and internationally-respected regulatory landscape, equips us to lead the world in banking, insurance, trading and related services. We should be fighting to maximise Britain’s advantage, rather than undermining it.
I know the reputation of financial services was hit hard by the 2008 financial crisis, but this should not prevent politicians from championing the sector and persuading the public of its merits and economic importance at this vital time. So whether it’s popular or not, I promise to do so and not just because of the jobs the financial services sector supports or the public services it helps to fund. It has a crucial role to play as we recover from the pandemic and seek to avoid a return to the dark days of 1980s levels of unemployment.
Of course, we must continue to work to ensure we never repeat the failures that led to the global financial crisis. It’s been particularly alarming to hear Mr Sunak talking about ushering in a new era of deregulation. As well as standing up for the financial services sector, I will continue to argue that the UK’s reputation does not rest on low standards. It has attracted and retained many leading financial institutions precisely because they have confidence in our laws and regulators.
Politicians and businesses must not just speak up now to push the government to secure improvements to the Brexit deal for financial services but also oppose any race to the bottom through deregulation. For my part, I will continue to bang the drum for the UK financial sector around the world — and be a champion for the world-leading services they provide.