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UK MOVES TO ‘TURBO-CHARGE’ LONDON FINANCIAL SECTOR

International 15 Dec, 2022 Follow News

UK MOVES TO ‘TURBO-CHARGE’ LONDON FINANCIAL SECTOR

By Michael Jarvis, London UK

The UK’s world-renowned financial district, known as The Square Mile, is poised to undergo a major regulatory overhaul aimed at making it more globally competitive.

The announcement is already sending ripples through the global financial industry and is expected to have far-reaching implications not only for its competitors in the United States, and European and Asian financial centres but also for offshore financial sectors in Cayman and other British Overseas Territories and Crown Dependencies.

Outline the plan, the UK’s Chancellor of the Exchequer (Finance Minister) Jeremy Hunt said the reforms being considered would make the City of London financial district “one of the most open, dynamic and competitive financial services hubs in the world”.

The package labelled the ‘Edinburgh Reforms’ named after the Scottish capital where Mr Hunt unveiled them, are also being referred to as the ‘Big Bang 2.0’ proposals.

The 30 measures proposed largely relax restrictions previously in place when Britain was part of the European Union, and are seen as a response to encroaching competition mainly from EU financial centres.

They include; removing a cap on banker’s bonuses, relaxing current rules that separate banks’ investment and retail operations, and broadly repealing and reforming EU rules dating from Britain’s membership and developing what has been termed “a smarter regulatory framework for the UK”

The UK’s departure from the EU resulted in barriers to financial business with the continent, and boosted competition from Amsterdam, Paris and Frankfurt. The Dutch city has overtaken London to become Europe’s top share trading centre, though the UK capital remains the largest financial services centre overall.

Finance minister Jeremy Hunt said the government was using “Brexit freedoms” to make Britain more competitive.

Since Brexit, UK financial services have lost direct access to European markets and so-called passporting rights, which allowed major global banks to serve the EU from Britain.

It’s estimated that around 7,000 financial services staff and £1.3 trillion (€1.5 trillion) of assets have been taken out of the UK’s financial sector and relocated to financial centres in the EU, mainly in Germany, France and The Netherlands.

The EU is meanwhile updating its financial rules to reduce dependence on London.

However, debate continues on the logic and effect of Brexit on th UK’s lucractive financial sector, with some critics saying the changes being considered by the British government will hardly offset what they regard as the negative impact to date caused by Brexit. But Prime Minister Rishi Sunak - a former Chancellor of the Exchequer (Finance Minister) and ex-senior executive in the UK financial sector - has insisted that regulation will remain “robust”.

When he outlined the plans for his Big Bang 2.0 a few days ago, current Chancellor Jeremy Hunt said the objective was to ‘turbo-charge’ the UK economy post-Brexit and ensure that London can compete with other financial centres.

“This country’s financial services sector is the powerhouse of the British economy, driving innovation, growth and prosperity across the country,” Hunt said.

“Leaving the EU gives us a golden opportunity to reshape our regulatory regime and unleash the full potential of our formidable financial services sector.”


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