The Budget must deliver a more competitive financial centre

TheCityUK has called on the Chancellor to use his 2021 Budget and Spending Review to reinforce British competitiveness and help return the UK to being the world’s leading international financial centre within five years.

The UK-based financial and related professional services industry, shares the compelling vision set out in the Chancellor’s Mansion House speech to make “this country the world’s most exciting financial services hub for decades to come.” However, delivery of that vision requires close cooperation and a concerted effort between government, industry, and regulators.

TheCityUK has set out the industry’s recommendations for the upcoming Budget and Spending Review, including measures on tax, supporting the judiciary and courts system, and deepening the UK’s diplomatic and regulatory leadership with key markets around the world. It also recommends partnering with the industry to help achieve key objectives to level-up the economy and deliver on the transition to Net Zero.

Miles Celic, Chief Executive Officer, TheCityUK, said,

The future of the UK’s status as a world-leading international financial centre rests on a vision based on openness, competitiveness and connectivity. There must be continued investment across the country, the deployment of world-leading technology must continue, and our expertise in key future markets such as green finance enhanced. Achieving these goals will need closer working between government, industry, and regulators. This Budget and Spending Review is the perfect opportunity to strengthen this partnership.”

UK-based financial and related professional services are a significant part of the UK economy representing over 10% of the UK economic output (£205.5bn). The industry contributes £96.1bn in tax (12.9% of total UK tax receipts), returned a trade surplus of £77.8bn in 2019, and provides 2.3 million high-quality jobs across every region and nation of the UK.

TheCityUK’s Budget and Spending Review recommendations to deliver on the government’s agenda include:

Ensuring strong public services:

  • Abolish the bank surcharge and bring the effective tax rate that banks pay in the UK closer to that paid by competitors in the US, Germany and the Netherlands.
  • Make significant improvements to the range of vehicles available to the UK asset management sector to attract and retain capital management activity in the UK.
  • Ensure that Insurance Premium Tax is not increased as it drives up the costs of necessary forms of protection, disproportionately affecting the least well off.
  • Set out a strategic tax roadmap to focus on improving the UK’s tax competitiveness to help provide certainty and stability and tighten the scope of tax rules.

Supporting the UK’s judiciary and courts system

  • Proactively address the issue of remuneration and pensions to ensure sufficiently deep and diverse pool of skilled candidates for future judicial appointments.
  • Commit to a long-term investment in the UK judiciary and courts system, including future investment – in both technology and courts structures and processes – to reflect the needs and expectations of users and to respond to the challenges set by competitor jurisdictions.

Advancing Global Britain

  • Use this year’s Budget to re-focus economic diplomacy onto deepening regulatory engagement with priority countries (particularly with developed markets), building new trade and investment ties, and supporting international development (particularly in developing markets).
  • Increase the resources available to the economic teams in the UK’s network of Embassies and High Commissions in priority markets. This would ensure that diplomatic missions in these countries are able to draw on the expertise of dedicated financial services related staff.
  • Invest in developing stronger commercial partnerships in targeting developing markets by supporting industry efforts to develop countries’ business environments through the targeted use of Overseas Development Assistance (ODA) initiatives.

Levelling up

  • Establish wider indicators of policy success in this Budget, in consultation with the public, regional leaders and industry stakeholders, to ensure that the levelling-up agenda has rigour. These could include metrics focused on economic opportunities and environmental impact.
  • Ensure that key departments refresh their business plans as part of the Spending Review process to include key performance indicators specific to levelling-up. This will ensure that levelling-up remains a cross-government priority.

Leading the transition to Net Zero

  • Identify and develop incentive structures that can help promote sustainable investments over non-sustainable ones and considering how the tax system can be used to incentivise the journey to net zero.
  • Commit to long-term support for those transitioning to electric vehicles – for example, with exemption from Vehicle Excise Duty and separate rates of business-in-kind rates for employees who drive electric vehicles.

Delivering the Plan for Growth

  • Ensure the Basel prudential regime works for UK small businesses at this important time of recovery, while adhering to the broad international standards.
  • Ensure that educational investment is aligned with the skills needs of businesses and accessible across the UK, reflecting that two thirds of the 2.3 million people employed in financial and related professional services are based outside London.