Financial services face triple call for change

Changes to the governance of financial and related professional services in the UK, including relaxing immigration and mobility rules, have been proposed in three separate reports published this month.

Outline map of United Kingdom infographics with data charts representing communication, internet and technology

David Sapsted

12 September 2023

View your copy of the Summer 2023 issue of Think Global People magazine - including special Awards supplement*

Two of the reports – one from TheCityUK trade organisation and the other from the Institute of Export and International Trade (IOE&IT) – focus on how the UK's nations and regions could thrive if there was greater devolution of the professional services currently concentrated in London and SE England.The third report, Vision for Economic Growth, prepared by the City of London Corporation and consultant group Oliver Wyman, looks at how London can maintain its position as a global financial hub following concerns that Brexit was affecting its international competitiveness.

A plan to boost the UK services sector for the age of AI

One recommendation is for the creation of a new council, headed by the Treasury, with a membership consisting of industry representatives and regulators, to spearhead policies in the sector in the coming years."We need to be more strategic as financial and professional services, just as some of our competing financial centres like Singapore, which have medium- and long-term strategies," said City of London Mayor Nicholas Lyons."Given the right legislative and regulatory conditions, the financial and professional services sector can boost investment in our businesses and drive growth right across the country, financing our future.“Delivering the far-reaching outcomes outlined in this report will depend on the public sector and private sector collaborating to boost our competitiveness, create great jobs nationwide, and secure a more sustainable future for all."The report identifies objectives that will enable the UK's financial sector to play its part on the global stage and lead on key challenges such as AI and climate change. Initiatives include freeing up capital from insurers by easing their solvency rules and allowing pension funds to invest in infrastructure and growth companies.

'Potential financial contribution reflects significance of the sector'

Chris Hayward, the corporation's policy chairman, said, “This is an industry-shaped vision for what the financial and professional services could look like by 2030 and beyond and how we can help contribute an additional £225 billion of economic growth into the UK economy.“This figure highlights not only the significance of UK financial and professional services to our economy, but also the urgency by which we must make these reforms to drive the country forward."In a time of mounting competition and economic headwinds, it’s time for a roadmap that future-proofs UK financial services and produces more investment, more jobs, new businesses and more funding for public services."

Levelling up the services sector across the UK

The IOE&IT report Global Horizons: Realising the services exports potential of UK nations and regions, was prepared in conjunction with management consultants Flint Global and found that significant improvements in connectivity, education and immigration policy were needed to narrow regional disparities across the country.With services – including legal, financial, creative, architectural and engineering – accounting for half of the UK's exports, the UK ranked second globally in services exporters, and first in Europe, said the report."However, these are concentrated disproportionately in London and the South East, which in 2021 accounted for 60 per cent of all UK services exports," said the institute, adding that Cumbria, Lincolnshire, Cornwall and the Scilly Isles were the lowest performing regions.The report recommended that, at a national level, the government needed to strike new international trade agreements and ease immigration and mobility rules to ensure the UK remained "competitive, collaborative and attractive" for international trade.At a regional level, the report called for investment in the digital and physical infrastructure; encouraging economic complexity and sector specialisation; increasing levels of education and training; and boosting higher education R&D.Marco Forgione, director-general of the IOE&IT, said: “The UK is a services superpower, but we’re facing an array of economic and geopolitical challenges which could threaten the prosperity of our British businesses in the coming years. “It is vital that we do not become complacent, and maintain our global advantage as an exporter of services. This report has identified a clear pathway to continue this success: by focusing on our nations and regions and closing the gap in London dominance. The UK thrives best as a trading force when all its component parts thrive individually."Sam Lowe, partner at Flint Global, added: “Our research demonstrates that there are many domestic opportunities for UK policymakers to improve the regional services export potential of the UK.“Or, to put it another way, you cannot expect UK services firms to sell into global markets if they suffer from poor international and digital connectivity, have trouble hiring qualified staff, struggle for funding, and don’t have the local economic infrastructure to support such an endeavour."

Is more devolution the answer?

A similar message was contained in the third report, Enabling Growth Across the UK, published by TheCityUK, although it found that significant progress had been made recently by several regions.With almost 2.5 million people now employed in financial and related professional services, it found that two-thirds were now based outside the capital and that, for the first time, employment in the North West (289,000) had actually overtaken the level in the South East (286,000).The report said that, over the decade to 2021, the sector's economic output had increased by £75 billion at an average annual growth rate of four per cent. Northern Ireland experienced the highest annual growth rate (6.5 per cent on average), followed by London (4.9 per cent) and the North West (3.9 per cent).National and regional financial centres such as Birmingham, Manchester, Edinburgh, Bristol, Glasgow and Leeds now had more than 30,000 in industry employment, the report added.Miles Celic, CEO of TheCityUK, said: “Financial and related professional services are an engine for growth and enabler for the wider economy. The industry’s continued strong contribution to jobs and economies right across the country underline its status as a national success story."The growth in industry employment outside London over the past decade also reflects the significant investment made by firms across the regions and nations and their commitment to building a strong pipeline of talent. But there is more that can be done to enable the industry to support faster growth across the country."Recommendations in the report included:

Enhanced devolution to drive regional growth, with greater consistency in the powers offered to each area to enable the coordination and leadership required to maximise growth."Continuing to invest in and support great civic leadership will also be vital. Leaders should engage with business, set out their plans to drive growth and be held accountable for their delivery."
Further devolution of education policy and funding in future devolution deals to enable, over the long term, local leaders to take greater oversight of education at all stages and better integrate this with Local Skills Improvement Plans.
The need to continue the expansion of the infrastructure of government across the UK, which would support and engage growing businesses across the country’s financial hubs."There should be a more coordinated approach to attracting investment and recognition of the importance of supporting industry hubs around the country that don’t have a Mayoral Combined Authority or resources to run their own arms-length investment body."

Find out more about the Think Global People community.

Subscribe to Relocate Extra, our monthly newsletter, to get all the latest international assignments and global mobility news.Relocate’s new Global Mobility Toolkit provides free information, practical advice and support for HR, global mobility managers and global teams operating overseas.

©2024 Re:locate magazine, published by Profile Locations, Spray Hill, Hastings Road, Lamberhurst, Kent TN3 8JB. All rights reserved. This publication (or any part thereof) may not be reproduced in any form without the prior written permission of Profile Locations. Profile Locations accepts no liability for the accuracy of the contents or any opinions expressed herein.