John McFarlane's speech to TheCityUK Annual Conference 2018

In his speech to Annual Conference John McFarlane, Chairman of TheCityUK, talks about the industry's value to the economy, what Brexit needs to deliver for UK trade, and the long term future of the industry.

John McFarlane's speech to TheCityUK Annual Conference 2018

John McFarlane, TheCityUK Annual Conference 2018

 

Welcome to TheCityUK 2018 annual conference, held for the first time in the Queen Elizabeth II.  Thank you all for attending, and a special thanks to Accenture for partnering with us on this event. 

Our line-up of speakers from the worlds of politics and industry will undoubtedly make for an interesting event – thank you to all of them for joining us here today. 

TheCityUK was set up to provide a single voice for the financial sector and its ecosystem, all vital national assets.  It is the only cross-sectoral, industry-led body of its kind, representing the 2.3 million people who work in this industry up and down the UK. 

London and ‘the City’ is an important part, but the majority of employees – and where future growth opportunities may be greater – are across our regions and nations.

Our focus is to promote policies that drive competitiveness and solidify the UK’s position as the world’s leading international financial centre and Europe’s financial hub.  And for the UK to retain that position and remain globally competitive, it must be open to the world and ahead of the developments that are reshaping our industry.

A key component of the UK’s success as a global leader in finance is its openness to trade and investment.  Our ability to attract and develop great ideas, innovation, and talent is essential for our continued success.  As we enter a new period in our trading history, it is vital that this approach is retained.

The UK is the leading exporter of financial services globally, more than the combined total of the next two leading countries, the US and Switzerland.

The UK must therefore remain a beacon for what can be achieved through open and free markets, and good work in this area is already underway through the Chancellor’s Financial Services Trade and Investment Board.

However, the uncertainty brought about by Brexit, requires that we must show the world that we are open to business, and, in particular, to talent in both from abroad and at home.

Brexit means the UK must forge new relationships and strengthen existing ones with developed and emerging markets. And there is great potential in the ability for the UK to shape its own trade and investment deals beyond Europe.

Let's remember, over the last generation, the UK has already become increasingly international.  We send a far larger proportion of our goods and services to countries outside of the EU than we did even in the 1990s.

But, for us to be successful over the long-term, the guiding principle needs to be for countries to export their competitive advantage and to import others’ competitive advantage.

Our competitive advantage is services - the UK economy is 80% services/20% goods.

Yes, there are few precedents on services being included in trade agreements.  Nevertheless, it would be very difficult for the UK to consider anything other than an agreement that covers both, with the EU and with other markets across the world. 

A good example of how this can work in practice is Australia.  It decided it would have an open economy with trade agreements with both goods and services.  This was a conscious trade-off, recognising that it would, over time, change what is produced domestically, and what is imported.  In the past, many major carmakers had plants in Australia, now there are none.  All are imported.

We are now approaching the final stages of the Brexit negotiations and notwithstanding much remains uncertain, we have had significant influence in a number of areas:

  • An interim agreement on transition
  • A desire on the part of the UK to secure a services agreement
  • UK branches of EU banks can remain as branches and re-designate to third country rather than subsidiarisation
  • EU citizens in the UK have the right to stay

But of course, there is still much yet to be agreed. The politics remain at the forefront of negotiations – but a pragmatic way forward must prevail.  Our priorities remain`;

  • Secure a services agreement based on a secure regulatory basis
  • Final agreement on the transitioning period
  • Contract continuity, and in particular the grandfathering of historical contracts
  • Future access to the best talent

And while the UK's relationship with the EU may changing, we mustn't forget the rest of the world is changing too:

  • India’s population will soon overtake China;
  • Nigeria’s will soon be greater than the US
  • Digitisation automation and artificial intelligence are opening up exciting new opportunities as well as disrupting to the status quo

All the while, the world is coming closer together and that is particularly true in tomorrow’s sectors such as FinTech.

But there is life beyond Brexit.  Whatever the outcome, the industry must maintain its focus on its global competitiveness.  We cannot take for granted our position as a world-leader in finance, nor rely on our historic strengths to carry us into the future.

Our report with PwC – A vision for a transformed, world-leading industry’, which we launched at this conference last year, has set the roadmap for our work in this area. 

For instance, FinTech is an area where the UK is already a world-leader - it will continue to drive our industry’s transformation.  A recent Innovate Finance report estimated that the total UK FinTech workforce would grow from 75,000 in 2017 to around 105,500 by 2030. 

Critically, the UK must be more open to attracting and keeping the best home-grown and international entrepreneurial, digital and financial talent to ensure this.

This was one of the recommendations of a TheCityUK and EY report on immigration published just a few weeks ago. It sets out clearly the need for the UK to have a robust and flexible immigration system that is future focused and fair.

People and talent is a top priority for all business leaders – the UK’s ability to draw global talent and retain and develop domestic talent has long been a competitive advantage. Losing this, will risk the UK’s future position as a world leading financial centre.  I’d encourage you all to read the report. Future skills and talent will also be discussed in our second panel session today.

This isn’t just a London concern.  There are pools of expertise right across the country and great opportunities for the future.  There are thriving financial centres across our regions. Manchester has seen an increase in financial and related professional services employment more than three times that of London over the past year (16% vs 5%).

To reflect our industry’s national footprint across the country, last year I appointed a number of City Chairs in some of the country’s major financial hubs – Manchester, Leeds, Bristol, Birmingham, Belfast and Cardiff.  They have doing great work in helping us promote the value and contribution of the industry to local economies and forging deeper, stronger relationship with key stakeholders across the UK.

So, there is much to discuss, and I am sure that today’s conference will provide some interesting insights into these trends and others.