Bim Afolami – 2024 Speech at the CityWeek Conference
The speech made by Bim Afolami, the Economic Secretary to the Treasury, on 20 May 2024.
Good morning, everyone. Thank you to William/New Financial for the invitation.
Over the last 3 years, this government has embarked on the most comprehensive set of reforms to financial services in a generation.
These could not have been more timely. Because in that time, our world has changed almost beyond recognition. A global pandemic. War in Europe. And, as a result, a cost-of-living crisis.
We have risen to these challenges. That’s why inflation is now falling, wages are rising, and the IMF has forecast that we will grow faster than any G7 European economy over the next six years.
But through all the changes – and difficulties – of recent years, one thing has remained constant – the UK’s pre-eminence as a global financial centre – with London at the heart of its success.
In periods of rapid change, you risk becoming extinct unless you can adapt and evolve accordingly.
I’m a student of history. So, believe me when I say that we have been here before.
Breton-Woods, the Big-Bang, and now Brexit. These were all responses to profound economic, political and historical shifts.
And rightly so. Because in those moments, unless you adapt and evolve accordingly, you will become extinct.
Today, we find ourselves at another of these moments. As the Prime Minister himself noted last week, more will change in the next five years, than in the last thirty.
That transformation carries potential for both risks and rewards.
And it is why for the UK’s financial services sector, everything has had to change for our success to be maintained. And the political, legal, and economic sovereignty that we have gained since 2016 allows us to do so.
It meant we could roll out a national Covid vaccination scheme faster than any other country in Europe. It allowed us to be amongst the first to help Ukraine defend herself. And – working hand in hand with industry – we are successfully delivering a new model for the UK’s FS sector.
Now as I mentioned in a speech I gave to the think tank Bright Blue last week, this model has three key elements. First, it is open to the world. Secondly it embraces the opportunities of tomorrow. And finally, it is firmly at the heart of a modern, dynamic UK economy.
Capital Markets
This philosophy has underpinned our reform of capital markets. The UK already has some of the oldest and deepest capital markets in the world – and today, we are Europe’s leading hub for investment.
The government is committed to building on those strong foundations. That’s why almost four years ago, our Prime Minister – at that point, our Chancellor – set out his vision of a technologically advanced, open, sustainable, and competitive financial services sector.
But promises alone are not enough. You have to deliver. And my promise to you I that I will continue to do so as long as I am in this post.
That’s why we are completely rewriting the UK’s Prospectus regime to make it easier for companies to list and raise capital on UK markets. This will increase the pool of investors with a stake in UK markets and allow firms to more easily raise larger sums of capital to invest in their growth.
Alongside this, the FCA are rewriting our listing rules for a new generation. This will bring our regulatory regime in line with international counterparts and provide greater flexibility to firms and founders when raising capital.
I’d like to thank Lord Hill and Mark Austin in particular for their support of this reform agenda.
But in particular, I am extremely excited that we are establishing a world-first new class of market, the Private Intermittent Securities and Capital Exchange System PISCES.
- This will give private companies better access to UK capital markets and create regulatory coherence between public and private markets.
- Here is what it means for the UK’s approach.
That we are on the front-foot. That we have lent into the structural shift to private markets. That we evolve in response to circumstance and allow ourselves to take risks in doing so.
Because as I said in my “capital markets renaissance” speech at Bloomberg earlier this year – there’s no point having the safest graveyard.
Pensions Reforms
Achieving that capital markets renaissance requires rediscovering the productive potential of UK pension funds.
The numbers are sobering. UK pension fund holdings in UK listed equities have fallen – from 53% in 1997 to around just 6%. They invest even less in unlisted equity, especially in comparison to international peers like Australia. Friends, that’s not good enough.
But I know the rewards of changing those numbers are clear. Improved saver returns and improve economic growth. Billions of pounds of investment for high-growth companies. And thriving capital markets.
That why we are building on the Chancellor’s package from Mansion House 2023, which will unlock up to £75 billion of financing for growth by 2030.
To do so we are undertaking three workstreams. First, we will further consolidate the pensions market.
Secondly, we will ensure our regulatory framework rewards investment for long term returns rather than high costs.
And finally, we will ensure that pension funds have access to high-growth assets – including in the science and tech sectors – via the ‘LIFTS’ initiative. We announced the winners of this initiative at Spring Budget 2024.
Partnerships
Of course, just as our economic sovereignty has allowed us to chart a new domestic approach for UK capital markets, we have also used it to renew our international partnerships.
We are clear about what the UK can achieve on the global stage. That’s why the Foreign Commonwealth and Development Office’s 2023 refresh of our foreign policy approach – against a background of profound geopolitical shifts – highlighted financial services as a key competitive advantage of the UK economy, and a tool of statecraft that we can use to align the international order with our values.
You might think that’s somewhat academic. I know from my work with the City that you are practically minded people, who want to understand the impact of our decisions.
So allow me to set out what we have achieved with key international partners.
Gulf States
Take the Gulf, whose jurisdictions are fast emerging as key capital markets partners for innovative financial services.
We echo that positive approach to a changing industry. That’s why in 2023 we agreed with the Kingdom of Saudi Arabia to collaborate on financial services, including capital markets – which will harness that dynamism to maximise the full potential of UK sourced capital and finance in the Kingdom.
The EU
Of course, although we’ve been busy making new friends halfway across the world, the UK still needs to be a good neighbour.
The UK and EU’s financial markets remain deeply interconnected – in 2023 the EU was 35% of our financial services trade – our largest trading partner, and it’s right that in the current global climate, they remain so.
Although our regimes will of course evolve differently over time, I know that we are aligned on our principles: open markets, supported by high global standards. I am confident in saying that, under my watch, the EU will never have cause for concern about regulatory standards in the UK.
Our UK-EU regulatory forum is an important vehicle to facilitate access between our capital markets. At the inaugural event last year, we shared best practice on our work – including our innovative T+1 settlement.
China
Finally, it is crucial that we continue to engage with our strategic competitors – such as China. Although – as with any bilateral relationship – we won’t always agree on everything, you simply cannot give the cold shoulder to an economy that is home to a fifth of the world’s globally systemically important banks, four of the world’s largest banks, and almost a third of the world’s leading global financial centres.
It is in our interests to engage where we can – profoundly so – it makes good economic sense, and it also means we can continue to tackle shared global challenges such as climate change, biodiversity loss and ageing societies.
Where China is concerned, we must take the long view.
Of course, we should only engage where it is consistent with our interests. But be in no doubt – that is absolutely not the same as disengagement. If we hesitate too much – as Lord Cameron himself noted two weeks ago – our competitors will write our future for us.
I echo that view – and it underlines why we must continue to engage with China on financial services.
That’s why I took the opportunity to speak at the China – Britain Business Forum in March this year, where I set out how financial services sits at the heart of many of the shared challenges we face, and how working together we can resolve them with outcomes that benefit us all.
Conclusion
But I have spoken enough for today. And so I will leave you with this.
What you have seen from this government – both at home and abroad – has been nothing less than an ambitious parliament of delivery.
We have drawn on our long history of expertise in financial services to meet today’s challenges. We are rebuilding our framework from the bottom up – and nowhere better encapsulates that than our capital markets reforms.
But why is financial services so critical? Because it lies at the heart of the real economy, and the challenges our society faces.
It’s not just numbers on a spreadsheet, or bankers getting richer. Because products like mortgages, loans, investment – mean homeownership, small businesses and education.
People sometimes like to talk about the social contract between government and society. That if you are willing to work hard, and operate within the rules, then you will thrive.
Well, financial services underwrite that contract. A contract which requires industry, regulators and government to work together – to deliver a sector, and a future, that will benefit families and businesses up and down the country.
Now let’s get out there and deliver.
Thank you.
