Paul Manduca, Chairman, TheCityUK Advisory Council, delivered his speech to TheCityUK Annual Dinner on Tuesday 08 November 2016.
My Lord Mayor, Your Excellencies, My Lords, Secretary of State, Ministers, Aldermen, Sheriffs, Ladies and Gentlemen.
Welcome to TheCityUK’s annual dinner in this magnificent venue.
And thank you to Freshfields for partnering with us for this year’s event. I commend to you their excellent report: ‘Beyond Brexit – Visions of a post 2020 World’ – which will be sent to all of tonight’s guests.
Each year we meet to celebrate the success of the UK based financial and related professional services industry and to look ahead at the challenges and opportunities before us.
TheCityUK was founded in the aftermath of the financial crisis. It has played an important role in leading the debate on the development of the industry - that started then and still continues.
Tonight the world looks to the United States to see who the American people have chosen to lead them. And in the UK we too face important choices following the European Referendum - with Sterling currently close to a 168 year low. The stakes are high for all of us.
The financial industry and Government share the same goal – to ensure a successful future for the UK after we leave the EU.
I believe we can achieve that – but it will require a close partnership, a clear mutual understanding of the priorities - and a collaborative approach on all sides.
The best outcome for all of us is a strong and pragmatic relationship between the United Kingdom and the European Union. That relationship will be built on our shared history, mutual benefit, commercial interests - and I hope trust.
We have a marketplace today that benefits both Europe and the UK. Now we need to work hard both to preserve mutual market access, and develop new ways of taking the relationship forward. And in the coming negotiations we must recognise that there can be no short-term fix but a long-term solution that will reset the relationship and last for decades to come.
London has a proud history and has long been Europe’s financial centre. Many of London’s links with Europe are centuries old and pre-date any concept of the European Union. It was not, however, always so.
In the thirteenth century Florence was the leading financial centre followed much later by Venice, Bruges, Antwerp and Amsterdam. Over many years these centres changed and lost their leadership - and industrial and commercial decline was eventually followed by merchants moving and finance following them even later.
In fact financial centres usually carry on successfully for a long time as long as they do two crucial things: adapt and innovate.
A classic example is shipping. In 1957 Britain still had the world’s largest merchant fleet. Today, more than 50 years later, Britain’s merchant fleet is less than 1% of the world’s shipping.
And yet London today remains the world centre for maritime services with a 29% share of global marine insurance premiums and over 40% of global ship broking.
They stay - they tell us - because of the deep and broad pool of expertise and, importantly, the interaction between different professions. This enables swift and creative solutions to complex problems - in other words they stay because it is easy to do business.
I picked shipping with an eye to the Lord Mayor and his career in maritime, but banks, insurance companies, asset managers, lawyers and accountants have world-class brands and support clients and customers in every kind of industry, all over the globe.
Often these professionals work together in a complex eco-system, a whole even greater than the sum of its parts – based on their ability to capitalise on their interactions and relationships.
By 1913 the number of foreign banks in London had risen from 3 in 1860 to 71. Whereas in September of this year there were over 250 such banks here, more than in any other financial centre - which compares with around 180 with branches in New York. Now they are here, we want them to stay.
A financial centre’s global leadership position does not depend on local financiers, but on a fluid group of international professionals who want to trade here.
London’s success at building this network has brought huge benefits to the UK in many different ways.
Formerly this network was largely built around the well-known merchant banking families, but latterly it has become the global and international banks. They make an enormous contribution to wherever they decide to base themselves and in recent decades they have chosen the UK.
After surviving numerous financial crises, Amsterdam eventually succumbed to London in the late 18th century arguably due to politics – the financiers feared what might happen once the revolutionary French, under Napoleon, were in charge of Amsterdam – and they moved.
London has survived many upheavals over the last century, but Brexit will be a crucial test and we must make sure we pre-empt changes that might lead to a similar fate to that of Amsterdam and that we – industry and Government – draw on our collective assets and create the right solution.
TheCityUK’s purpose is to represent the interests of the industry and to serve our members by supplying hard data and facts which support their decision-making processes and inform wider debate. Let me give you some of those facts.
The UK-based financial and related professional services industry employs around 2.2 million people across the UK, two thirds of whom are based outside the M25. For example, my own company is one of the largest private employers in Stirling.
That is why a thriving financial centre helps the whole of the UK.
Our annual contribution to exports is £97 billion pounds – more than all other net exporting industries combined. And our contribution to GDP is 12%. The total tax contribution made by the financial services sector is £67 billion. That is over twice the UK Government’s budget for transport.
The industry also supports business investment by lending each year over £430bn – and helps raise nearly £400bn through the London Stock Exchange and private equity.
Mortgage lending has helped two thirds of the population buy their own home and insurers protect 90% of the population’s possessions. Investment managers help people plan for the future by protecting and growing £4.3 trillion in assets.
And we should not just see financial services in monetary terms. While the industry’s financial contribution to the UK economy is significant, there is an additional understated contribution to charities, the arts, sport and quality of life in the UK and European economies.
The financial services sector donates more to charity than any other – and of the top 10 most generous companies, six are City firms.
London with its deep and robust capital markets is the world’s leading financial centre. We have a regulatory framework which is fair but robust and is trusted globally.
London is not just an advantage for the UK. It is also a great asset for Europe.
The depth and breadth of the UK’s financial industry is hugely beneficial to clients and customers around the globe and it would not be easy to replicate. Add our time zone, language and legal system and Britain is a unique location with benefits not found anywhere else.
This will remain true after we leave the EU – and this unique combination of strengths provides the mandate to keep our trading relationships as close as possible to those we have today.
This network is not static and needs to be refreshed regularly with new talent. Skilled international workers bring with them a range of experience, new ideas and capabilities. The UK has for many years taken for granted its ability to attract some of the most capable people to come and work here and contribute to its success.
The growth of Fintech in London and around the country for instance demonstrates what international talent and creative thinking can achieve - and it also shows how a collection of successful industries has developed and promoted innovation.
London, like New York, must be able to continue to attract the best qualified executives and staff, regardless of their domicile, in order to maintain its competitiveness.
However we are also committed to growing talent at home.
Around 1 million individuals have qualifications administered by the UK’s legal, accounting and related professional bodies. The increasing number of apprenticeship schemes being developed is another example of the City and industry upskilling the UK’s workforce.
In turn that talent expects first-class infrastructure.
Here in London we all look forward to the opening of the Elizabeth Line and the Northern Line extension and I am delighted that a decision has finally been made on expanding airport capacity in the UK. We shall of course be hearing more about that decision from the Secretary of State later – but I am sure he will agree there is much more still to do.
Ladies and Gentlemen over the last few minutes I have outlined some of the elements that support the UK’s global leadership in financial and related professional services.
We now need from the upcoming negotiations a sensible tailored deal which reflects our strengths and maintains the UK’s leading global status. Most crucially, we have to ensure it remains easy and straightforward to trade and invest.
Secretary of State, I know that you and your government share our aim that after our exit from the EU, London should continue to be the world’s most influential financial centre so that we can continue to be a major contributor to the UK’s economy.
To achieve that end here are some basic necessities.
First, there must be close collaboration between our industry and government throughout the exit process. By working together constructively, we can give business the confidence and stability it needs to invest.
I commend the Bank of England for the work it has done on maintaining stability since the Referendum.
Secondly, we are currently part of the Single Market and we should seek an agreement on long-term trading arrangements that are as close as possible to those we already have.
Thirdly, Britain should invest in the diplomatic infrastructure needed to boost future trade relationships. This will pay dividends over the longer term – both in developed and emerging economies.
And, finally, we must build a deeper partnership between government, regulators and business that is tailored to the country’s post-EU needs and allows our industry to support and contribute to Britain’s long-term success.
We, TheCityUK, will, of course, put all of our resources at the disposal of your government in the coming months, to help you and your colleagues to secure the best possible deal for the UK – which of course will also benefit the European Union and the global economy.
We look forward to working closely with you to achieve this.
Thank you very much.
Ladies and gentleman, may I ask all guests to stand and drink to
The Lord Mayor, the Sheriffs and the City of London Corporation.
Thank you very much.