8 suggestions to make the UK more competitive – according to 300 CEOs and business leaders
While the increased focus from government and regulators on growth is welcome, bolder ambition and faster, more decisive action to reform the financial system and reinforce the UK’s global reputation for legal certainty is needed.
This was the finding of a landmark report published by TheCityUK and PwC UK, setting out the actions needed for the UK to lead in the next era of global finance.
The report is based on one of the largest industry listening exercises in years, drawing on engagement with over 300 senior leaders across industry, government, regulators and academia – and underpinned by new economic modelling and international benchmarking from PwC.
The leaders warned that without decisive action, the UK risks ceding unrecoverable ground to competitor financial centres who are investing heavily in digital market infrastructure, accelerating regulatory and tax reform, and using targeted incentives to attract capital, talent and innovation.
The impact of moving slowly is already being felt. While insurance and professional services are outperforming, overall industry growth has flatlined over the past decade, with real growth averaging just 0.1% a year since 2014 and productivity falling sharply.
New PwC economic modelling suggests that, on current trends, the industry could grow at only 0.5% a year in real terms through to 2035, steadily eroding the industry’s share of the UK economy and limiting its capacity to support households and businesses through lending, insurance and investment services.
But the upside from acting decisively is substantial, with PwC modelling showing that the UK could unlock over £53 billion in additional annual economic output and £22 billion in additional annual tax receipts by 2035 – around £770 per household.
The benefits would also be felt across the wider economy, with the UK having direct access to scarce global skills, specialist expertise and deep pools of capital to support national priorities such as infrastructure, defence, energy security and high-growth businesses.
Some of the suggestions which were put forward by the business leaders include:
- Accelerate rollout of a consumer-friendly digital and corporate identity for financial services – Government, regulators and industry must work together to deliver a universal, consumer-friendly digital and business identity for financial services that reduces costs and improves access.
- Digitise broken processes – such as homebuying and SME lending, to boost productivity, reduce costs and directly support wider government objectives. The government must make this a priority, use its convening power to set the guardrails, mandate digitisation and standardise access to its data.
- Restore predictability and competitiveness on tax – Set a long-term tax strategy focused on stability, simplification and targeted incentives to restore confidence and unlock investment.
- Adopt a more proportionate approach to wholesale regulation – Post-crisis reforms strengthened resilience but have left wholesale regulation overly complex and costly. The UK must match the pace of reform seen elsewhere and adopt a much more differentiated, proportionate regulatory framework tailored to wholesale and specialist markets.
- Radically simplify regulation, supervision and governance – UK regulators must deliver faster authorisations and streamlined processes; the government must provide consistent air cover for regulators and tolerate proportionate risk, including recognising the risk of failure to give firms the confidence to innovate; while firms must simplify their own internal data and streamline governance.
- Put financial services at the centre of the UK’s trade strategy – Financial services, data flows and regulatory cooperation must sit at the heart of trade agreements and economic diplomacy, and there must be greater coordination to actively champion the UK internationally and attract investment.
- Make it easier to attract and retain global talent – The UK must streamline routes for high-value talent and entrepreneurs and provide a stable, predictable tax and mobility environment to remain attractive.
- Strengthen and consolidate public financial institutions – UK pensions and long-term savings remain under-allocated to UK, high growth and alternative assets, in comparison with international peers. Accelerated consolidation and public financial institutions with greater scale would partner more effectively with private capital and help unlock billions in productive investment.
“The UK’s financial and related professional services industry is a strategic national asset that cannot be taken for granted. While professional services and insurance are outperforming, the industry’s growth overall has flatlined,” said Anne Richards DBE, Chair of Project Steering Committee and Chair of TheCityUK Leadership Council.
“We are at a critical juncture. The message from industry leaders and stakeholders is clear: build on the positive approach in place to reform the system, but do it faster, with greater ambition and with targeted execution.”
Richards added that it has never been more urgent for industry, government and regulators to act together to unlock growth and drive innovation.
“This is an industry that delivers value right across the economy and society. If successful, the UK will become more competitive and appealing for investment, businesses, and talent, benefitting people nationwide.”
