UK finance firms seek ‘bold’ reforms to counter Wall St ascendancy #NewsUnitedStates

LONDON, Nov 13 (Reuters) – Britain’s finance sector is counting on policymakers to deliver a rulebook revamp that prioritises growth and stops business slipping away to global rivals, amid fresh challenges to London’s financial superpower status.

UK finance minister Rachel Reeves is giving her first Mansion House speech to leaders of the City on Thursday and is expected to outline the role the left-leaning Labour government wants them to play to help increase national prosperity.

Pressure is mounting after Trump vowed to “liberate” the U.S. economy and financial sector by slashing regulations and restructuring federal agencies.

Samuel Gregg, political economist at the American Institute for Economic Research, said the sector in Britain needed to respond fast.

UK finance firms “should be using the second Trump presidency as an opportunity to tell government that financial deregulation and lowering corporate tax rates can be avoided no longer,” he said.

QUID PRO QUO

Her government needs the industry’s tax receipts, which totalled 110.2 billion pounds ($140 billion) in 2023, equivalent to more than half the UK health budget, a study commissioned by the City of London Corporation and TheCityUK showed.

“UK policymakers have a real opportunity to move the UK in a different direction,” said Monique Melis, Kroll’s Global Head of Financial Services Compliance and Regulation.

Building closer ties to the Middle East, Asia-Pacific, Africa and the United States could give the UK “a real edge in the future,” she said.

But staying ahead of competitors who have their own plans to cash in on innovations like green finance, digital currencies and artificial intelligence will not be easy.

Kate Dawson, sector lead of capital markets at KPMG UK’s Regulatory Insight Centre, said some EU rules will still encumber UK firms and the bloc’s push for ‘strategic autonomy’ bodes poorly for UK firms seeking access to EU markets.

“The EU is introducing rules that will have extra-territorial impacts,” she said, flagging examples like the Corporate Sustainability Reporting Directive, the Corporate Sustainability Due Diligence Directive and the EU AI Act.

OUTDATED FRAMEWORK

A report published last month by think-tank New Financial suggested UK banking, finance and capital markets have declined in relative terms in the past decade compared with international markets across nearly 60 metrics of value and activity.

The think tank said Britain’s regulatory framework, crafted after the 2008-9 financial crisis, was outdated, over-complex and lacking vision, and that rules need to encourage more risk taking, not less.

“I hope Rachel Reeves is bold and uses the opportunity to look at our overall approach to regulation and risk in this country,” David Postings, Chief Executive of trade body UK Finance, said.

This could include consolidating assets in the 360 billion pound Local Government Pensions Scheme into a number of larger investment pools, a model which has proved successful elsewhere.

Nikesh Patel, Head of Client Solutions UK at Van Lanschot Kempen said such schemes could collectively amass as much as 1 trillion pounds of firepower over the next 10 years.

($1 = 0.7844 pounds)

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