• Monday, June 17, 2024


Snap election brings optimism to UK’s financial sector that looks for revival

Matthew Ponsonby, UK head of global banking for BNP Paribas, feels ‘whoever wins, they must not take their foot off the pedal of constructive reform’.

Keir Starmer (Photo by Leon Neal/Getty Images)

By: Shubham Ghosh

AS BRITAIN gears up for another trip to the polls, executives in the City of London are optimistic that a new government will prioritize their concerns and bring an end to the prolonged political turbulence. Amid possibilities of a potential shift in power to the Labour Party after nearly a decade and a half of Conservative governance, business leaders in London’s financial hub seem to be calm about the upcoming July 4 vote, Reuters reported.

The financial community had encountered hostility from former Tory prime minister Boris Johnson, who, prior to his leadership, downplayed companies’ anxieties regarding the country’s exit from the European Union.

While relations between the finance sector of the City of London and the government have ameliorated since then, the aftermath of Brexit, political instability, and economic unpredictability have collectively impacted an industry responsible for approximately 12 per cent of all UK tax revenues, the Reuters report added.

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The detrimental effects of the ill-fated ‘mini-budget’ during the brief tenure of Liz Truss at 10 Downing Street in September 2022, also continue to linger in memory. This event caused a surge in government bond yields.

While the UK continues to maintain its position as a leading global destination for investment in finance, foreign investment in its financial and professional services sector saw a significant decline last year and the London stock market has been grappling with challenges to attract new listings.

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“It’s encouraging that the huge value of the City to the UK economy is recognised on a cross-party basis, as is the need to proactively ensure that the UK retains its status as one of the world-leading capital markets,” Matthew Ponsonby, UK head of global banking for BNP Paribas, was quoted as saying in the Reuters report.

Top minds of the finance industry hope that a new government after July 4 will put priority on reforms that encourage the City’s competitiveness and draw more global interest as it competes to keep pace with rivals, while also making a move to unlock pension cash for key long-term investments.

According to Ponsonby, “whoever wins in July, they must not take their foot off the pedal of constructive reform”, the report added. He also cited an example stamp duty on UK equity trades.

Executives and lobby groups have pointed out that opposition leader Keir Starmer, currently enjoying a considerable lead in opinion polls over the incumbent, has populated his top ranks with politicians who are open to the goals of the finance industry.

Labour has also actively pursued the support of the City, labeling it as Britain’s “crown jewels” and engaging in consistent dialogue with banks and investors regarding the reforms proposed by the Conservative government to enhance the sector’s competitiveness after Brexit. While the party’s plan for the City seems to have taken on board elements of the government’s reforms, the evolving landscape of campaigning suggests that significant adjustments may still occur.

If the Labour comes to government, it would confront similar challenges with cash-strapped public finances as the current government and would thus rely on private investors to assist in financing the substantial investments necessary to achieve targets in areas such as housing and energy transition.

“It’s about recognising the really important role that financial services play in the economy,” Amanda Blanc, CEO of insurer Aviva, told Reuters.

“We have a real vested interest in the future success of the UK and long-term investment, and that is what we just want, respect for financial services.”

(With Reuters inputs)

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