The City minister doubled down on the government’s collision course with regulators today as he laid out a choice between “high regulatory barriers” and making the Square Mile “competitive” on the global stage.
Speaking at the City Week Summit in London this morning, the Economic Secretary to the Treasury Bim Afolami said there was no benefit in making the UK the “safest graveyard” as he called for closer engagement with China and the EU on financial services.
The comments are likely to ramp up tensions between Westminster and the City watchdogs after a furious backlash to the FCA’s plans to ‘name and shame’ firms under investigation in recent weeks.
As the FCA closed a consultation on the plans last month, the Chancellor Jeremy Hunt launched an extraordinary broadside on the regulator and urged it to “re-look” at the plans.
Afolami separately took aim at the payments regulator over the weekend as he claimed there were “significant problems” with a new payments regime.
Speaking at the Guildhall today, he fired another barb at regulators and drew a dividing line between tough regulation and being competitive on the global stage.
“Anybody can compete in two principal ways. One way is by having very high regulatory barriers, forcing anybody who wants to deal in your market to go through a very specific sets of rules that are distinctly different and will be hard to avoid. That’s one way of competing, through high regulatory barriers,” Afolami said.
“Another way of competing is to be more attractive by being more competitive by being better. We as a country choose the latter.”
Bim Afolami
Tensions have been rising due to a view in government that the regulators have ignored a new secondary objective which require them to consider the growth and competitiveness of the UK economy.
Since the objective was introduced last summer, the FCA has strengthened its enforcement teams and rolled out a sweeping package of consumer rules which have forced companies to overhaul their operations.
The FCA has previously pointed to the fact it faces a “juggling act” to balance its priorities and has also changed the UK’s listing rules and introduced measures like a ‘consolidated tape’ to make trading data more accessible.
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Inside Westminster’s war with the FCA
The calls from Afolami came as he pledged closer ties with China on financial services amid a backlash from some quarters over the UK’s ties with the country.
“As China is concerned we are taking the long view. That is absolutely not the same thing as disengaging,” Afolami said.
“We must continue to engage with China on financial services.”
The comments come as a debate rages in the city over whether to welcome the China-founded fast-fashion giant Shein onto the London Stock Exchange.
Bosses at Shein are reportedly close to filing for an IPO on the market after facing pushback in the US due to the company’s labour practices and proximity to the Chinese government.
However, some fear that the UK is at risk of watering down its standards in order to win the firms listing.
Shein has rejected claims it uses “forced labour” in its supply chain and says it is “committed to respecting human rights”.
“We take visibility across our entire supply chain seriously and we require our contract manufacturers to only source cotton from approved regions,” Shein has said.