It is now time to put financial services front and centre
As the dust settles on the Budget, the worlds of politics and business have inevitably turned back to Brexit. The rumours this week around equivalence for services are encouraging, but the industry is now looking for these to materialise into a concrete agreement.
Getting a good deal for financial services is critical, but for the sector to flourish, and to be in the best position to support growth at home and keep the economy in a leading role on the global stage, we need to think about joined-up, long-term domestic policies that support the sector.
This is crucial for us all. Leaders across financial services talk about the direct contribution the sector makes to the economy. The sector is proud to employ over two million people, pay more tax than any other in the UK and last year generated a trade surplus of £68bn – the largest of any country. In 2017, the financial services sector contributed £119bn to the UK economy, 6.5pc of our entire economic output. This is vital revenue that helps pay for our schools and hospitals, and balances an economy that is heavily dependent on imports elsewhere.
It is rarer to hear people talk about the secondary impact of having a world-leading financial services sector, which will be even more important post Brexit. Funding the infrastructure the UK needs to remain competitive, enabling the digitisation of the economy, leading the way on green finance and embedding sustainability across the corporate world, all of these will be delivered faster if we continue to have world-class financial services.
So, how do we ensure financial services is as successful as it can be?
A 21st-century economy demands a modern infrastructure. To compete at a world-class level we need do better. In our 2018 UK Attractiveness survey, foreign investors in financial services voiced increasing concerns about our infrastructure. The extra support for our road network announced in the Budget is welcome, but government commitment to improving our digital infrastructure is what investors and businesses are really looking for.
We need to maintain our reputation as having the best environment for innovation. An EY study of fintech clusters ranked the UK top for its policy environment last year. This is incredibly valuable for brand Britain but is something we will need to work hard to protect as other countries are investing time and money to try to overtake the UK. Getting people with the right skills is the single most important factor for the UK’s long-term competitiveness in all sectors, not just financial services. Against this backdrop it is clear that the current immigration system is not fit for purpose. We have worked closely with TheCityUK on this issue, and have proposed solutions that could help business attract the talent it needs. For example, a relatively easy fix would be a flexible short-term immigration category to enable staff to transfer to their UK office for up to six months, without needing to apply for a visa. Clearly any immigration system needs to go hand in hand with developing the skills of our own workforce and I welcome the Chancellor’s announcement to create a task force to set out what the sector needs.
A stronger financial services industry would continue to drive investments into technology, cyber and resilience that will benefit the whole economy.
UK consumers and businesses would have access to first-class services and products across lending, saving and pensions. Products that are easier to understand and manage, that are more accessible and perform at a better price point than in other markets.
The industry currently supports 2.2m skilled jobs. The people who work in these roles would have access to lifelong learning in the skills that we as a nation will need to compete globally.
A world-class digital payments and banking system lays the foundations for the digitisation of the broader economy. Financial services across the world are at the forefront of the fight against cybercrime. Ensuring that the UK has the skills needed to protect our financial services industry will upskill the wider economy and ensure that we have the safest, most secure financial services that will drive trust and underpin future economic growth. Looking beyond tech, the financial services industry is also at the heart of pushing for greener, more sustainable business across the UK. Making sure the UK maintains its lead in creating green finance products, and that the industry continues to challenge the boards of the companies they invest in about the long-term value and sustainability of their business models, will pay dividends financially and result in a safer, more robust economy.
These are worrying times for those who care about the UK’s global standing. Our recent EY Brexit Tracker showed that 77 leading financial services firms have already confirmed they are moving operations of staff to elsewhere in Europe.
The co-location of leading technology and financial services in the same cities in the UK is an incredible competitive advantage that we should make sure we protect.
Brexit is undoubtedly a worry – we need the right deal – but there is much more scope to make positive domestic policy changes than the current binary commentary around Brexit suggests.
The finance sector has proven itself to be remarkably adaptive, innovative and will remain a key part of the economy. However, if we create an environment where financial services can flourish we will be laying the foundations for a really strong digital, green and highly skilled economy.
‘A stronger financial services industry would continue to drive investments into tech, cyber and resilience’