In a recession, the UK should remember its greatest strength: financial services, argues Chris Hayward
Last week we found out that the UK officially entered recession at the end of 2023. We need growth now – and to achieve that we must play to our existing strengths, which is financial services.
Financial and professional services serve as a powerful engine for the economy, providing 2.5m jobs and nearly £100bn in tax contributions – 13 per cent of the government’s total tax revenues – that fund our public services.
However, the UK cannot be complacent – our international competitiveness relies on an innovative and productive approach to the financial and professional services sector. That’s why Labour’s recognition in its recent Financial Services Review, Financing Growth, that the UK’s financial services sector is one of the nation’s greatest assets, helping to drive economic growth across the country, is encouraging.
In the 1,000-year history of the City of London Corporation we’ve worked with all parties to help boost UK economic growth. Last year, we worked with the government to spearhead the Mansion House Compact, aimed at increasing investment from defined contribution pension schemes to unlock over £50bn of new capital by the end of the decade.
Responsible risk in pension policy and culture could free up to £75bn of investment to boost saving returns and businesses.
We welcome Labour’s commitment to undertake an in-government pensions and retirement savings overview to address the UK’s risk-averse culture and identify the barriers to pension funds investing in British high-growth businesses. In fact, many of Labour’s and the Conservatives’ ambitions align with our flagship report, Vision for Economic Growth, which provides a roadmap for financial services reform to drive prosperity across the UK to the tune of £225bn by 2030.
As part of this report, we called for the creation of a Financial Services Partnership Council to bring public and private sectors together to enact a bold global ambition, provide clarity to business and drive economic growth.
Labour’s recent announcement of 10 City advisors to support the Financial Services Review is an important step but we want to see this formalised into a Partnership Council to include the full scope of financial and professional services industries. Only by looking to the long term can we fully harness seismic shifts in ideas, in industry, and in innovation, to ensure that the UK remains competitive.
Labour’s call to embrace fintech and innovation as the future of financial services also aligns with the City’s direction of travel.
As the leading tech market in Europe and the third largest in the world, we can sharpen our competitive edge by playing a leading role in the regulation and innovation of fintech and AI among other emerging technologies.
The UK’s financial services sector is one of our great success stories. That should be recognised and fully utilised by any future government. In a time of recession, the sector is key to growth.
But more needs to be done to create the conditions to allow the industry to thrive and unleash its vast capital to invest in the entire economy, boosting growth and living standards across the country.
Labour’s Financial Review is a positive start, and we will work with all political parties to achieve this aim.
Chris Hayward is policy director at the City of London Corporation