There are two areas in particular that represent important growth, innovation and export opportunities for the UK financial and related professional services industry and the UK economy:
- Green and sustainable finance – to facilitate productive investment in the UK and mobilise private sector finance for the global economic transition to net zero carbon.
- Technological innovation and its application to finance (e.g. the use of distributed ledger technology).
- For example, the Investment Association’s recent report on fund modernisation provides recommendations on the practical application of blockchain and distributed ledger technology, as well as analysis of the necessary regulatory changes.
But the UK is at risk of falling behind other jurisdictions on these opportunities. These are areas where regulation can and should be supportive. To position the UK at the forefront of international innovation and trade in these areas, a strong and stable regulatory framework and environment would be a competitive advantage.
The UK has an opportunity to develop regulation that:
- Puts the UK at the forefront of innovation and growth in key areas of economic opportunity.
- Gives business and investors the clarity and confidence they seek to do business and invest in the UK.
- Interacts well with emerging international regulatory standards, minimising friction in cross-border trade.
- Enhances the FRPS industry’s ability to attract investment into the UK and channel it into sectors across the UK economy, supporting long term growth and the transition to net zero.
- Enhances UK attractiveness to start-up and scale-up businesses with high potential for growth and job creation.
- Leads the way in developing an effective and integrated international approach to all elements of ESG (environment, social and governance) in relation to economic investment and growth.
On Green Finance: We partnered with PwC recently to publish a report on enabling the net zero transition, including a 10 point action plan for government to generate the huge investment needed to fund transition of the UK economy to net zero carbon. Action in this area is crucial to the future success of the UK economy, and to positioning the UK as a leader in facilitating green and sustainable finance to support the global net- zero transition.
Recommendations:
a) Government should work with industry, UK regulators, and counterparts in other jurisdictions to develop international standards that will deliver the outcomes described above. This requires a balance between speed and rigorous attention to getting the details right, through an open and collaborate process.
b) Government should implement the reforms set out in our report mentioned above. Net zero transition should be a priority area for urgent and sustained government action.
c) Government should work with industry to enhance the UK’s listing environment to better compete with stock exchanges in other jurisdictions such as the US.
d) We welcome the proposed changes to the pension charge cap that will facilitate pension trustees wishing to invest in a wider range of productive, long-term assets – supporting long term economic growth. Finalising the detail of this proposal should be a priority for government.
e) The government should also take up the recommendations of the Productive Finance Working Group to unlock investment in productive finance.
f) The government should create a dedicated and effective regulatory regime for digital assets, to ensure the UK becomes the leading international market for tokenisation of financial assets.