Economic Secretary to the Treasury at TheCityUK's Annual Conference
Speech given yesterday by the Economic Secretary to the Treasury at TheCityUK's Annual Conference.
Good morning, everyone and thank you Miles for your words of introduction.
It is great to be back with you.
Coming together for events like today gives us an opportunity to hear and learn from one another, to push forward in our shared venture of making the UK the envy of the world when it comes to financial services.
It reminds me of another conference that took place 78 years ago tomorrow.
As allied forces fought in Europe and the Pacific, 730 delegates from 44 Allied Nations met at a secluded Mount Washington Hotel in Bretton Woods.
Their purpose: to agree on a system of international cooperation and economic order to help recover from World War Two and foster long-term growth.
78 years later we are at a similar crossroads. As we gather today, the global economy is, in many respects, in retreat.
We are, along with our partners, treading new ground as we emerge from the depths of the pandemic.
We are, as a staunch allies of democracy, helping defend Ukraine from an illegal invasion by Russia that has sent prices rising.
Interest rates are hiking across the world to tackle inflation. And while the path ahead remains uncertain, one thing is absolutely clear, which is that this government will work tirelessly to boost our economy.
More than that, we must take the opportunity to be collaborative, to look again at how the financial services sector operates in this new global economic reality… and how it can serve everyone from the international businesses down to our local communities.
I want to build on the already huge impact the financial services sector has on the UK economy.
More than 2.2 million people employed across regional hubs in all four UK nations… An annual contribution to the UK gross value added of £261billion… a tax contribution from the sector of over £75 billion so that we can fund our hospitals, schools, roads, and protect our environment and our future.
Our seat at the table of global financial giants is secure. But I want us not just to survive or accept the status quo – as impressive and favourable as it is. I want us to grow.
Our vision is for an open, green and technologically advanced financial services sector, that is globally competitive… that creates jobs and supports business… that underpins growth across the country and acts in the interests of our communities.
We have been afforded a unique opportunity to reset the system and do things differently.
Our work is already underway – and I want to take this opportunity to thank The City UK and everyone in this room who has helped inform the steps we are now taking.
With your help, we’re implementing a set of reforms that will sharpen our competitive advantage in financial services.
My focus now is on delivering the legislation to make this happen.
Financial Services and Markets Bill
That is where the Financial Services and Markets Bill comes in.
This truly is an important moment and a significant Bill.
It marks a major step forward in reshaping our legislative and regulatory regime to reflect our status outside of the EU, as an independent nation.
This Bill will make the most of the opportunities now within our grasp. To do so, we are revoking EU law and replacing it with a more coherent, agile approach to regulation.
This includes reforms to Solvency II, to spur a vibrant and competitive insurance sector without compromising our high standards and policyholder protections.
We will be introducing new secondary objectives for the PRA and FCA to ensure a greater focus on growth and competitiveness.
Meanwhile, we continue to reform the rules that regulate the UK’s capital markets, the engine of the UK economy, to promote investment.
We have established and are legislating separately for the UK Infrastructure Bank to help level-up and deliver Net Zero across the country.
And we will harness the opportunities of innovative technologies in financial services, including supporting the safe adoption of a certain classification of cryptocurrencies, stablecoins, where used as a means of payment.
I also want to say how proud I am that through this Bill we are introducing additional protections for those investing in or using financial products by strengthening the rules around financial promotions, and also providing recourse for the victims of scams.
This Bill is about enabling economic growth and regeneration… it is about protecting the sector and its consumers…. and it shows the world that far from the bonfire of regulation some have shouted about, that we are already looking at how we can strengthen our world-leading regulatory standards, in a way that supports the UK’s position as a global financial centre.
The Chancellor and I are committed to openness as one of the core pillars of our financial services strategy.
Our new freedoms will be used to develop our relationships with jurisdictions all around the world, attracting investment and increasing opportunities for cross-border trade.
In the last year, I have visited Madrid, Luxembourg, Brussels, and Berlin. I met with my counterparts and with industry, and discussed our vision for financial services, our bilateral relationships, shared challenges in the sector and areas for cooperation.
I made clear that we have anunshakeable, abiding interest in a prosperous Europe.
And I also made it plain that leaving the EU is not about a race to the bottom. So, it is time to put to bed the idea that the EU will have grounds to deny the UK access because of poor regulatory standards. In many cases, we want to strengthen standards.
And we can always be relied upon to pursue the highest possible international standards.
One area that I know you will be eager to hear about is the UK’s equivalence framework.
One of the key reasons we take equivalence decisions is to support the openness of the UK’s financial services industry. Something that is providing the foundations for a growing sector,
Of course, the UK continues to keep its overseas framework under review and will make updates when necessary.
While key, equivalence is only one of a range of mechanisms the government uses to govern cross border financial services activity.
Leaving the EU provided an important opportunity to also look at our overseas framework, and the regimes within it, to make sure they’re working effectively.
We are currently assessing how the overseas framework is being used and considering the implications of any reforms in careful detail and will bring forward proposals in due course.
But I will say that I firmly believe that our openness is both good for the sector and serves our national interest. And is helping to enhance the UK’s position as one of the world’s leading financial centres.
UK’s growing FinTech sector
Before I come to a close, I want to talk about a crucial part of our sector’s future.
In a sector that is synonymous with innovation, we want fintech to continue to be a jewel in the crown.
Last year UK fintech received $11.6bn of investment, more than any other country, bar the US.
Investment in UK fintech is about the same as the top nine European countries combined.
We’re off to a great start but I want this country to be the very best in the world to start and scale a fintech firm.
With that in mind, the Government and regulators are taking forward the recommendations of the Kalifa Review.
And at the 2021 Spending Review, the Government confirmed it will provide £5 million of seed funding for the creation of a new industry-led Centre for Finance, Innovation and Technology to tackle barriers to growth and accelerate the UK fintech sector.
At the same time, the Department for International Trade has launched a package of initiatives to supercharge commercial support for UK fintechs seeking to expand internationally and to encourage overseas firms to establish a presence in the UK.
Finally, the FCA has also made changes to its sandbox regime to make it easier for firms to access support as they develop and grow used to their regulatory status.
Ladies and Gentlemen, I believe in the extraordinary potential of our industry… I believe that it is a force for good.
But we won’t remain the world’s foremost financial centre simply by wishing it so
We have a once in a generation opportunity, that this government is taking, to develop a new framework to reflect our new position outside of the EU, to update the rules and regulations, and to position ourselves at the forefront of new and emerging technologies… unleashing the sector, driving growth.
That will, in turn, improve lives across the country. And that starts with a collaborative approach, hard work and great ideas.
Thank you for listening.
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