Speech delivered by Bruce Carnegie-Brown, Chair, TheCityUK Leadership Council, at our Annual Conference 2023:
Good morning. Thank you Miles, and welcome again to everyone.
In my role as Chair of the Leadership Council, it has been a privilege to be part of the work that Miles and his team are doing to champion UK financial and related professional services with policymakers, regulators and key domestic stakeholders here and overseas – promoting its role in supporting, enabling and growing the UK economy.
This work has never been more important than it is today: a time when our international and domestic relationships are in a period of realignment, having been exposed to more change and uncertainty in the last few years than any time in the previous five decades.
The crises that were developing at our last conference have embedded themselves further and – with the possible exception of the pandemic, of which we continue to feel the impacts today – the world is in an arguably more difficult and challenging place than it was even a year ago.
Those conditions might leave us wondering how to respond.
In one of my other roles, I am the chairman of the MCC – so given it is the second day of the Lord’s Test match, you might indulge me in the use of a cricketing metaphor to illustrate my key themes this morning.
I’ll attempt to explain my logic for those who don’t share my enthusiasm of bat and ball...
At the halfway point in 2023, the bowling at both ends of the wicket is hostile: at one end of the wicket we have political instability, from restoring relationships post-Brexit and responding to strained relationships between the US and China, to responding to Russia’s illegal invasion of Ukraine – and at the other end of the wicket we have economic challenges, from supply chain disruption to a low growth, high inflation environment and the shock of rapidly rising interest rates.
Underneath it all, environmental challenges are making for a tricky pitch – forcing us to rethink how we live, invest, and protect the sustainability of our economies and way of life.
If these are the risks we face, in the UK we are fortunate to have some of the best batters in the world.
The professionals who work in our industry not only have the skills and expertise to address these risks and realise the opportunities, but collectively, they also enable growth across the whole economy, support people and businesses at various life stages and make a substantial contribution to this country.
This is perhaps best illustrated in having the largest sector trade surplus of any nation in the world.
In cricket, we measure our batters by the number of innings they play; the absolute number of runs they score; the average number of runs they score before giving away their wicket; and their strike rate.
For financial and related professional services, the metrics are broader still: the number of international banks operating in London; our share of foreign direct investment; our share of foreign exchange transactions; our share of the world’s investment assets; the number of people we employ right across the country; the strength of our exports; the importance of English law in setting contracts and resolving disputes; our high accounting standards; the tax revenues we generate for government; and many more besides.
It's a complex scoresheet, but on nearly all measures we remain world-class – a position we should never take for granted, but which serves as a starting point for further, continuous improvement.
One particular strength is in innovation.
At present, we have 37 of the Top 50 Fintechs – six of the top ten – headquartered here in the UK. And earlier this year, London overtook San Francisco as the leading destination for Fintech funding for the first time.
In the Lloyd’s insurance market, my principal day job, we have hosted our hundredth startup in the Lloyd’s Lab – which receives over 200 applications for every cohort, competing for just ten places.
97% of participants are still in operation – an exceptionally high survival rate in the cutthroat world of innovation – while 70% remain active in the London insurance market.
Those innovators want to come here to access the UK’s unrivalled insurance expertise; its unrivalled access to global markets; and its unmatched pool of specialist insurance, legal, accounting and professional talent, which, in the case of London, is all within a stone’s throw of the Lloyd’s Building.
But even with this line up of talent and expertise – our confidence has been dented by the uncertain bounce of the pitch and the multiplicity of challenges we have had to face.
We have lost some early wickets: UK growth lags behind many of our peers, recent political and economic uncertainty has impacted our reputation globally; the staying power of inflation has been badly underestimated by the central bank, while policy interventions in the US and EU have lured capital, investment and trade away from our cities.
In finance, our rates of growth in banking, insurance and wealth management have slowed since 2018.
This has caused commentators to ask whether the UK is in decline. Whether our star has waned.
But while we may have been trapped at the crease for an extended period, the answer to the challenges we face is not to hunker down – not to slow the pace and eke out a draw.
It is, of course, to embrace ‘Bazball’ – the inspirational approach of the England Men’s cricket team to test match cricket.
For those scratching their heads, the essence of Bazball is to take more risk; to attack harder; to score faster; and in so doing to put our opponents and competitors under pressure; to have them respond to our style of play; to be leaders in setting the agenda; and to be brave.
Most of all, it’s about mindset and attitude.
For financial and related professional services, this means embracing innovation – while putting more measured risk into the system, not less. Backing those who work in our industry to find the solutions to the problems facing the world, whether in the development of carbon markets, the underwriting of insurance for ships transporting Ukrainian grain through the Black Sea, or the investment in life sciences and AI.
And being willing to fail at times, even as we are ambitious to win.
Vitally, it also means ensuring that our industry is open and attractive to the best talent.
It would be wrong of me to use a cricketing analogy without acknowledging the Independent Commission on Equity in Cricket report, published on Tuesday, with its sobering comments on cricket's lack of diversity – and of course, we have faced similar criticisms in our industries in recent years.
While we can take some pride in the progress our industry has made, there is more we must do to make our ecosystem more reflective of our country. The rising generation of our future leaders is diverse, dynamic and exciting: something I see every day at Lloyd’s and in TheCityUK.
So like the world of cricket, we must keep reforming ourselves to represent our communities. And like cricket – where England last week called up 18-year-old spin bowler Rehan Ahmed to join the squad – we must keep embracing the diverse talent coming through our ranks.
But it’s not just the players and the coaches that must embrace this mindset – it’s the umpires and administrators of the game: the politicians and regulators.
Make no mistake, this is not a request for changing the rules. It’s not about bringing the boundaries closer or introducing one-hand-one-bounce to make the game easier.
This is about making sure that regulatory actions – whether in terms of the frequency of meetings with regulators, the approval regime for new senior manager appointments, or recovery and resolution plans – are proportionate to the size of the business being regulated and the policy objective regulators are seeking to achieve.
In the last twelve months, it has been encouraging to see the Government’s policy agenda, through the Edinburgh reforms, placing emphasis on competitiveness and growth as a secondary objective for regulators as part of the Financial Services & Markets Bill.
This now needs to be matched by an equally ambitious response to promoting the growth agenda from our regulators.
These reforms, implemented well, will help drive this change of mindset away from defensive strokes and towards confident ball striking – reinventing and reinvigorating our sector to lead and grow in the coming years.
The reforms should be accompanied by the transparent reporting that allows us to show we are making our processes quicker and more efficient for those seeking to grow here – while also keeping innovation at the heart of our system, creating capacity for the measured risk-taking and managed failure that form an essential part of the innovation life cycle.
With enhanced support from Government and regulators, the industry has all the materials it needs to support innovation and growth in the coming years. As with the England Men’s cricket team, we have the talent and the personnel – we just need a mindset shift.
And as we look at the opportunities, there are obvious places we must align.
To highlight the key one: 90% of the global economy is now signed up to hitting net zero. So, it’s imperative that we throw our weight behind this monumental transition.
A recent report from TheCityUK highlighted the opportunities around carbon trading, 90% of which is conducted this side of the Atlantic in a sector that has seen an annual growth rate of 56% in the last decade.
The UK is becoming increasingly influential in this space. And with the first ever carbon credit insurance being developed in London, in the Lloyd’s Lab by InsurTech Kita, it’s clear we are teaming up across the financial ecosystem to deliver this opportunity.
Over half of all sustainability startups are registered here in the UK ; and with the UK Government’s green finance strategy supporting those efforts, we have made a strong start.
The challenge is now to put our money where our mouth is: investing in green innovation and aligning our finance, policy and regulation behind this important growth area.
Again, it starts with our mindset.
One study estimated that coordinated action by global economies to tackle climate change could deliver a $45 trillion benefit to the world economy. Inaction will lead to a $180 trillion hit.
We must not let our short-term reporting deadlines and election cycles undermine the benefit we stand to gain from investing in the future.
The long-term cost of inaction is far greater than the up-front cost of investment.
But positive action – such as freeing up our pension funds to make better returns for pensioners, while investing in the vital sustainable infrastructure the country needs – could unlock significant growth for the UK.
This change of mindset will also allow us to unleash opportunities across digitalisation, data, intangible assets, AI and the host of other opportunities ahead of us. Needless to say, the advance of technology will not wait for us to clear out our in-trays. We must start now, and with the backing and governance to enable those ideas to flourish.
So, despite fears that the UK is losing competitiveness, we can have confidence in our people and businesses right across this industry to play their part.
We should not let the condition of the pitch and the opponents we face dent our confidence: times of difficulty have always fuelled innovation, and innovation is the life blood of growth.
And like any top-class sporting professional, we should embrace competition and rising challengers as a spur to lifting our own game – while developing the challengers in our own ranks.
That mindset is clearly working for the England Men’s cricket team, with eleven wins in their last 14 games – so let’s draw inspiration from them and adopt a Bazball mindset, with confident batting and a front-footed approach to innovation, in order to deliver the growth, policies and regulation that can get our economy back to winning ways.
I look forward to seeing how we can collaborate across our sector and all its stakeholders to take advantage of the opportunities ahead.