Britain needs the City to be more open and fair

The past year has seen the beginning of many changes to our economy. We are getting ready for Liam Fox to strike new trade deals, David Davis to safeguard old alliances and Boris Johnson to introduce global Britain to the world. This is an exciting time for British business. It would be easy to think that all we need to do is sit back and wait for the opportunities to roll in, but that would be wrong. We need to ensure that we are ready not just to compete but to succeed in this new world.

That means looking at the old ways we have done things and thinking again. How can we make our markets more attractive, our industries more productive and our nation ready to grasp the new opportunities promised? There are many places we could start but I will look at the City of London.

For centuries Britain led the world by allocating capital efficiently to spur the economy and exploit opportunities around the globe. Our trading empire was built on coffee houses which became insurance shops so individuals could pool risk and could try new trade routes safe in the knowledge that they weren’t in danger of destitution if a storm sunk their ship. Across the country, savers provided capital to businesses through stock markets that allowed entrepreneurs to seize the initiative and communities to share in their success.

That history means Britain is still a world leader in the efficient use of capital. But we could do better. Today, too much is lost in charges and tied up in fees. This acts as a tax on business and, more importantly, a tax on growth. It costs us all.

As we leave the European Union we will have no excuse for complacency. We must reform our ways and ensure that every penny is used as efficiently as possible. That means openness.

Over the coming years we need to push for greater transparency in the City. We need to align authority, responsibility and accountability.

Too much of the City doesn’t work this way. Investment funds can mask charges in complex agreements and scalp small percentages of our savings. This doesn’t sound serious, but over the 40-year life of a pension a few per cent a year can see growth held back and overall returns can be as much as a third lower.

But this isn’t just bad for British pensioners, it is bad for everyone. Our children will have to fill the void left by charges and our economy will suffer from having seen capital shaved when it should have been invested. That’s a break not just on the economy but on society.

That’s why we need transparency. Transaction costs, on-going charges, management fees and exit costs could be better advertised. By putting the figures out there more clearly, people would be able to evaluate the benefits of one investment option over another and choose which product best suits them.

Britain isn’t alone in this: many markets suffer more from obscurity than us. But this should only spur us on.

By making the UK the most transparent destination for capital, we could reinforce our existing position as the global financial market. Our existing advantages – common law, the English language and our time zone – could be matched with our spirit of fair play to draw in money from around the world through our markets, to place it where returns are best.

While some may complain at first, the growth in business from a more open system would buoy our economy and attract investment.

I’m not the first person to have noticed this. Back in June, the Financial Conduct Authority (FCA) criticised asset managers for their opaque charging structure and, in 2013, the Office of Fair Trading said there was “insufficient transparency and comparability of charges” in the pension market. They said providers weren’t including costs and charges within the annual management charge in a consistent way, so comparisons were not like with like.

This hasn’t changed fast enough and we can’t wait any longer. That’s why I’m pushing for more action and I welcome the appointment of Chris Sier to chair a new working group that will establish disclosure standards for institutional investment fees for the FCA.

As a former policeman, turned professor at Newcastle University Business School, he has long campaigned for openness. He’s right. We need to ensure our markets are the fairest possible to attract the greatest share of global capital.

Markets and competition liberate and empower. They enable each of us to match what we have with what we want and prepare for an uncertain future.

But they only work if they’re fair. What we need to see today is not just a market solution but a transparent market and that means letting in the sunlight and looking hard into the mirror. Only then can we convince others what we know well – Britain’s place is assured because we are the fairest of them all.