It’s time for the UK to set its financial services sector up for success
With the Brexit transition period drawing to a close, the United Kingdom has a unique opportunity for legislative and regulatory reform.
For our financial services sector, the Treasury’s review of the regulatory framework presents a fantastic chance to set the UK up for another decade of global leadership, in an international market that is fast-changing and more competitive than ever.
The financial services sector is one of the engines of Britain’s economy. It employs over one million people, contributes over £130bn to the economy annually, supports the public finances through billions of pounds of tax receipts, and helps businesses and individuals across the country to grow. The UK bridges the gap between old and new: it is both a leading centre for the burgeoning global fintech industry and a stalwart of more traditional services such as asset management, insurance and wholesale lending.
Coronavirus has shown that banks and other lenders are an essential component of our national resilience. As the economic impact of the pandemic unfolded, lenders became a new line of defence, working in partnership with the government to provide emergency finance to businesses and offering mortgage and credit repayment holidays and interest-free overdrafts to those whose finances were affected.
With intense competition from other global and regional financial centres, the sector’s status as a world leader and a national asset should not be taken for granted. Preserving and enhancing it will require everyone — parliament, government, the regulators, and firms themselves — to ask fresh questions about what the future looks like and how to create the conditions that will make the UK an attractive location for domestic and international firms in the years to come.
That is why the Treasury’s review is so timely.
A key issue for the review to address concerns who sets the rules. The government appears poised to delegate greater powers to the regulators — whose expertise and understanding of complex markets makes them best placed to deal with the detail. But any extension of their remits will need new checks and balances to help them make better decisions, to scrutinise the decisions they make, and to hold them to account when they err.
Transparency and accountability are not just fundamental matters of democratic principle, but also essential if regulators are to make the right decisions on behalf of consumers. As the heart of British democracy, parliament should play a key role in keeping the regulators on the right path.
Getting this right will be more difficult than it sounds, particularly at first, as we find ourselves bolstered with competencies previously exercised in Brussels. That is why the All-Party Parliamentary Group on Financial Markets and Services, which I chair, is looking closely at what role parliament should play going forward, in an inquiry launched today.
Key questions that the inquiry will examine include whether there should be a joint committee of the House of Commons and House of Lords for financial services, and how the legislative process can be optimised for financial services.
This is an opportunity we must embrace. Our economy is emerging from the transition period into a world redefined by Covid-19. Now the UK must ensure that its strongest industries are best placed to thrive at home and abroad. We must use this unique moment to shape the financial services sector for the new world ahead.
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