Category: Economy

The speech made by Andrew Griffith, the Economic Secretary to the Treasury, on 17 April 2023.

Good morning, everyone.

Let me start by thanking Innovate Finance for inviting me and for organising such a fantastic conference.

As ever, you really are kicking off UK Fintech Week in style.

And it’s wonderful to be in this beautiful space – Guildhall – a venue constructed in the fifteenth century. It is a reminder of the proud and storied history of the financial services industry in this country.

As Economic Secretary, my objective is to ensure that the UK is the most innovative, most international and most business-friendly economy anywhere in the world.

I want the UK to prioritise growth, risk taking and wealth creation and to celebrate it for the moral good that it is.

And as we chart our way forward with the ability of being able to make our own rules for the first time in decades, it has never been more important that financial services are at the heart of those efforts.

That is certainly the objective that the Chancellor, the Prime Minister and I all share for the sector.

Innovation – all of you in the dynamic fintech community – has a huge role to play.

Bank accounts, payment services, the ability to borrow, save into a pension or other investments, buying insurance, or the provision of tools to understand finances better or to shop around offer enormous benefits to their users.

They create ladders of opportunity, the ability to transfer wealth over a lifetime, the chance to provide for our old age or they can shield us from some of the adverse events that life can throw at us.

Whilst I am proud to have many large and longstanding firms in the sector, it is rare that legacy firms have the ability to innovate at the pace required to make the most of changing technologies and keep us internationally competitive.

Our Fin Tech community is vital for the economy in improving productivity, creating choice, and reaching into new under-served segments of the market.

Which is why I am glad that as a location for Fin Techs to base themselves, on many fronts the UK is leading the way.

Indeed, the sector continues to go from strength to strength.

Data from Fintech Labs shows that almost half of Europe’s fintech unicorns are based here in the UK.

And Innovate Finance found that last year, the sector attracted more investment than the next thirteen European countries combined.

Our own commitment to supporting UK fintech is reflected in the actions we took, working with the Bank of England, to facilitate the private sector sale of the UK arm of Silicon Valley Bank to HSBC last month.

I know many of you in this room were directly affected by the collapse of SVB and I am glad that we were able to act decisively to secure an outcome which protected your capital and ensured continuity of banking services.

Throughout that intense period, I and other Ministers were accessible and constantly communicating with the sector.

Government isn’t perfect but I hope that when the chips were down we demonstrated the benefits of being a sovereign nation with the agility to make its own decisions fast.

But that is just the start.

Our belief in this sector is also evident in the proactive steps we are taking to ensure that you continue to thrive in the years ahead.

Importantly, the Government will reflect on the submissions to the Payment Services Call for Evidence and introduce an agile regulatory framework for payments and e-money that promotes growth and supports an internationally competitive payments sector.

We’re also fostering innovation by making the UK a safe jurisdiction for cryptoasset activity.

We set out plans in our wide-ranging consultation published in February, and we want to pro-actively support the use of distributed leger technology and tokenisation where it makes sense.

At the same time, I was pleased to launch the Treasury’s joint consultation with the Bank of England, on how to move forwards with a sovereign or central bank digital pound.

Private wholesale digital currencies are likely to come to market first and we are already creating the legislation to enable those which are fiat backed and used for settlement in the current Financial Services Bill going through Parliament right now.

And we have the upcoming Financial Market Infrastructure Sandbox, which will help industry adopt and scale digital solutions that could radically change the way markets operate. That will be up and running this year.

CFIT

One of the most important steps we have taken to support financial innovation over the past two years has been implementing Ron Kalifa’s fintech review.

Since being appointed, I have upped the pace of delivery and a few weeks ago we launched the new Centre for Finance, Innovation, and Technology – CFIT – in Leeds, a city where fintech adds £710 million to the local economy.

CFIT is backed by £5 million of Treasury seed funding, along with an additional £500,000 from our partners at the City of London Corporation.

It’s central task is to bring together industry players – entrepreneurs, policymakers, investors, and academics – into coalitions to address some of the trickiest challenges facing the sector.

I am delighted to announce today that CFIT’s first coalition will look at Open Finance and how unlocking financial data can benefit SMEs and consumers.

Everyone in this room understands how data can radically empower individuals and businesses alike.

McKinsey estimate that opening up financial data could boost UK GDP by a useful 1.5% by 2030 so CFIT has my full support as they go after that opportunity.

Open Banking

Open finance would obviously be the next development beyond the existing Open Banking ecosystem, which is one of the most dynamic and exciting anywhere in the world.

There are over 7 million regular active users of Open Banking in the UK and over a billion successful API calls every month. It’s spawned thousands of new businesses and products.

Those who are close to it, know that this is a key moment for the Open Banking regulatory regime.

We’ve done a lot of work over the last year through the Joint Regulatory Oversight Committee to set out the next steps to ensure Open Banking continues to go from strength to strength.

This morning, the Committee set out its recommendations, with a vision of a data sharing market which is competitive and scalable for the long term.

To achieve this, we will move Open Banking on to a sustainable regulatory framework, which the Government intends to develop through the Data Protection and Digital Identity Bill which has its second reading in Parliament today.

Open Banking will also transition to a new entity, with a broad-based, equitable funding model and high standards of corporate governance. Today we set out how we plan to get this transition started this year.

But we can’t spend all our time and energy on governance models.

So we also set out an ambitious roadmap of actions for the next few years, again starting immediately. By Q3 this year, there will be tangible progress across the board, on key themes such as mitigating the risks of financial crime and promoting new services, including variable recurring payments.

Let me be clear as I know some folk have been worried: this will be the year of delivery on the next generation of Open Banking.

Our plan is ambitious but achievable, and I am committed to maintaining our country’s leadership in this field. We won’t rest on our laurels, and I want to encourage all of you to work with me to build on the success that Open Banking has been so far.

Artificial Intelligence

If data is one limb that has the potential to transform the financial services sector, the application of artificial intelligence is the other.

Although there are already many deployments and uses in the financial sector, my belief is that we are barely getting started.

AI can help firms to identify and prevent fraudulent transactions, detecting suspicious patterns in real time.

By analysing data on market trends, customer behaviour, and other factors, AI algorithms can identify potential risks and provide recommendations for risk mitigation strategies.

It can help investment managers to make more informed decisions, driving better returns for savers.

And AI can power new customer service features, such as chatbots, which can deliver personalised support quickly and efficiently.

This technology has immense potential to transform the financial services sector.

And that is why the Government recently published its White Paper on AI which details our plans to make the UK the most trusted and pro-innovation system for AI governance in the world.

This builds on our recent £900 million investment to build an exascale supercomputer and to establish a new AI Research Resource. These will provide significant compute capacity that many in this room may wish to take advantage of.

Launch of the UK Fintech Census

But even as we support the fintech community here in the UK, it is vital that we help our firms to expand internationally.

That’s why my final announcement today is the launch of the UK Fintech Census, in collaboration with the City of London Corporation and Innovate Finance.

It is designed to tailor our support for you as we make the most of the UK’s access to international markets.

When you think about it, no other country on earth combines a seat on the Permanent Council of the UN with membership of NATO and AUKUS, a trade deal with the EU, accession to the Comprehensive and Progressive Trans-Pacific Partnership and being a founder member of the Commonwealth.

The Census aims to help you make the most of these opportunities by seeking your feedback on three simple points:

What international markets do you want to break into?

What are the main challenges that you face?; and

What further support and services would you like to see?

The Census opens today and will run for five weeks, aiming to reach all 2,500 fintechs in the UK.

And, in order to make it a useful and actionable data set, we will repeat the Census annually.

Conclusion

In conclusion, ladies and gentlemen I hope you are as excited about the opportunities as I am for you.

UK fintech is in a great place today.

But it’s our job, as a Government, to ensure that that success continues and we reach new heights… a mission to which, I assure you, we are utterly committed.

I am a do-er by nature: I have worked in disruptive businesses for most of my life and I want to deliver concrete actions that help this sector to thrive.

You’re already effective at telling us what you think – and I challenge myself and the team on a daily basis what more we can do to help.

So please let’s keep working well together so that at next year’s Global Summit – and many more to follow – we’ll all be able to look back on many more fantastic years for UK fintech.

Thank you very much.

The speech made by Andrew Griffith, the Economic Secretary to the Treasury, at the Mansion House in London on 12 April 2023.

Good afternoon and thank you Lee for that introduction.

It’s good to be here today to discuss this vitally important topic – and thank you Lord Mayor for everything you have done in a short number of months.

On this and on other aspects of our financial services you have been banging the drum for the City of London so loudly that I’m sure it has left our competitor countries ears ringing.

Not that, of course, we want that.

But we do live in a globally competitive world, and, frankly, I want us to come out on top.

Like you, I want us to be the most innovative, most international and most business-friendly economy anywhere in the world.

I want us to prioritise growth, risk taking and wealth creation and to celebrate it for the moral good that it is.

And as we chart our way forward in these uncertain times but with the agility of being able to make our own rules for the first time in decades, it has never been more important that financial services are at the heart of those efforts.

That is certainly the objective that I, the Chancellor and the Prime Minister all share for the sector.

Your theme today is Financial Literacy and Inclusion. How we ensure that financial services deliver for everyone.

Bank accounts, the ability to borrow, a pension, savings, insurance, or the use of financial technology offer enormous benefits to their users.

They create ladders of opportunity, the ability to transfer wealth over a lifetime, the chance to provide for our longevity or infirmity or they can shield us from some of the adverse events that life can throw at us.

So, it is important that we do everything possible to ensure no one is excluded – whether through lack of understanding or lack of access – from financial products which could help them succeed in life.

We can only do this by working together. You know that. It is why we are all here today.

But let me address myself particularly to the role of government and what specifically we can do to support financial inclusion.

I believe there are four things.

First, we can intervene directly to help those who do end up excluded in some way.

Second, when legislating, we can design regulations that are proportionate. Regulations that are mindful of the very real potential unintended consequences for financial inclusion.

Third, we can support financial literacy.

And fourth, we can create the environment in which innovators can bring forward new products that overcome financial exclusion.

Let me take each in turn.

On the first, I would humbly say that, although there is always more to do, this government is doing more than any of its predecessors.

We are continuing to maintain record levels of funding towards free-to-client debt advice provision in England via the Money and Pensions Advice Service bringing their budget this year to £93 million.

We have legislated so that every single person in this country must be able to open a fee-free bank account if they wish to.

There are more than 7 million of these accounts open today and something we should all be proud of is that more than 70,000 Ukrainian refugees in the UK have been helped to open one of these accounts over the last year.

Meanwhile, the Age Agreement, signed by the Treasury, the ABI and BIBA, helps older consumers who struggle to access motor and travel insurance by signposting them to appropriate insurers.

Originally signed in 2012, I’m pleased to say it will be renewed this year to continue supporting older consumers.

One of the largest interventions we have made is to support affordable credit.

We’ve given £100 million of dormant assets funding to Fair4All Finance to support their work on financial inclusion, on top of a further £45 million of dormant assets funding to the organisation to address the cost of living.

We’ve even provided Fair4All Finance with £3.8m of funding to pilot an entirely No-interest Loans Scheme.

And this isn’t the only work being delivered through dormant assets. DCMS recently consulted on another tranche of dormant assets funding, worth an estimated £738 million over time.

In its response, the government confirmed that youth, financial inclusion and social investment would continue as causes under the scheme.

As the Minister responsible for financial capability, I look forward to working with DCMS in exploring how building financial education and capability can be supported in the future as an additional aspect within the financial inclusion cause.

Finally, at the recent Budget, we extended the Help to Save scheme by another 18 months to 2025.

We will shortly be consulting on how we can simplify to make it even better and reach more people.

So as with Covid or energy bills, we won’t hesitate to help the most vulnerable – but most people don’t want a handout or a special product from the government.

They want to be able to access to same products with the same features and benefits as everyone else.

And that brings me to my second point about government’s role. Which is that as legislators, we must be careful when making regulations that they are proportionate.

It is too easy to have well intentioned regulations which potentially increase financial exclusion.

Examples could be client onboarding requirements which push the cost of advice out of reach for many who would benefit or mandatory affordability tests that actually reduce access to credit for some of those needing it the most.

It’s something that my officials and I are very conscious of.

It is why it is so important that you do respond to our consultations and it why every piece of legislation has a Regulatory Impact Assessment which is independently scrutinised.

Perhaps a good example of where I hope we are getting it right is on Credit Unions.

Ever since the 18th century, mutual societies have helped meet the needs of local communities.

Given their distinct business models, credit unions face a less onerous set of regulations than non-mutual retail banks.

For example, credit unions have exemptions from the requirements of the Consumer Credit Act 1974, which enables them to offer credit at affordable rates to their members who might otherwise be excluded from credit.

To help further the growth and sustainability of credit unions in Great Britain, the government is bringing forward amendments to the Credit Unions Act 1979.

For example, credit unions will be able to offer products such as car finance and distribute insurance to their members for the first time.

It’s a good example of proportionate regulation – or deregulation – being used to improve inclusion.

On financial literacy, I know that you heard earlier from Sam at National Numeracy who deliver programmes to support the millions of people who have low confidence with numbers.

I’m looking forward to supporting their National Numeracy Day on the 17 May and I am delighted that they are part of the Lord Mayor’s Appeal this year.

There couldn’t be a more important issue for all of us.

It is terribly concerning to hear the statistic that around 8 million adults in England only have the numeracy skills of a primary school child.

We know lack of numeracy is a barrier to using financial products and it is one of the main reasons why people get into problem debt.

The Prime Minister has been clear that numeracy is a personal mission for him too. At the start of this year, he said:

“One of the biggest changes in mindset we need in education today is to reimagine our approach to numeracy.

“In a world where data is everywhere and statistics underpin every job, our children’s jobs will require more analytical skills than ever before.

“Letting our children out into the world without those skills, is letting our children down.”

He laid out the path to introducing maths education up until the age of 18 by the end of the next Parliament.

Many of us are worried about the growth of a compensation culture impacting the sector. It’s a growing cost and has the potential to hold us back competitively.

Tackling some of the practices of claims management firms is one part of the solution.

But improving the level of financial literacy and an understanding of risk by the consumer can only help us return to greater role for ‘caveat emptor’.

There’s one final role for government. And that’s creating an environment which fosters innovation. Light touch regulation, a culture of supporting risk takers or simply regulatory sandboxes that are open for business.

The whole UK fintech sector is a great success story, with around 2,500 firms supporting tens of thousands of skilled jobs across the country.

In 2022, the sector attracted $12.5 billion of investment. This means that fintechs in the UK attracted more funding than those in any other country bar the US.

Much of what they do delivers for the financially excluded. For example, through new payments options or new tools and apps helping individuals manage their budgets or better understand their finances.

Artificial Intelligence offers huge possibilities for inclusion.

Alternative credit scoring to develop more accurate credit profiles for currently underserved groups.

Micro insurance to deliver low cost coverage;

And better fraud prevention as sadly fraud often hits the least resilient the hardest.

Let me finish with a specific example.

Access to cash is a topical subject bringing together many of the themes I’ve spoken about.

Nobody in this room needs reminding that as a society, we are moving increasingly from cash to electronic payments – with non-cash transactions now accounting for around 85% of UK payments.

Nor is it just the young: 8 out of 10 people of retirement age are using contactless card technology at least once a month.

The trend has benefits in convenience, security and for the environment.

However, we will not leave behind rural communities, the elderly or those who use cash as a way to manage their personal finances.

That is why, for the first time since the ancient Celts began minting coins in the British Isles, this year will see communities benefit from a right of access to cash, enshrined in law via the Financial Services and Markets Bill currently going through Parliament.

The right will cover not just withdrawals but also the ability to make cash deposits, something that is particularly important to small businesses.

Their continued ability to accept cash depends upon knowing they can deposit it safely. Putting this in statute is a huge step forward.

We have already made legislative changes to support cashback without a purchase. That turns every single corner and high street shop into a potential source of free cash withdrawal.

So, we won’t hesitate to legislate where necessary, but we delude ourselves if we believe that is the whole answer.

Like the trend away from the horse pulled carriage or domestic coal fires, we cannot hold back change for all time.

As I said before, innovation has a huge role to play.

So, I pay tribute to UK Finance, their member banks, LINK and the Cash Access group who have come up with a whole series of innovations to help the vulnerable. Community cash machines, shared banking hubs and more.

‘Tap and go’ technology for charities can eliminate the jeopardy from losing the old collection tins and even yield higher donations.

With the right controls, payment cards could help those with carers or in care. We have the popular ‘Go Henry’ cards for parents – why not ‘Go Harold’ or ‘Go Hilda’ for the elderly?

Earlier this year, together with the City of London Corporation, we launched a new government-seed funded national hub – the Centre for Finance, Innovation and Technology.

They are operationally independent, but I did put to Charlotte and Ez when we last met that financial inclusion was a big agenda that would be worth their consideration.

Let me conclude Ladies and Gentlemen by restating my commitment to work with you all on this agenda.

Thank you, Lord Mayor and the City of London Corporation for bringing us all together today.

The UK is immensely fortunate to have the great financial services sector that it does.

But part of growing sustainably and reaching our full potential is making sure that we include everyone and that is why the work of everyone here today is so important.

Thank you.

The speech made by Andrew Griffith, the Economic Secretary to the Treasury, in London on 30 March 2023.

Introduction

Thank you, John. As a former public company CFO, it’s certainly a relief to know that you’re introducing rather than interrogating me today.

And thank you to everyone here at the Funds Congress for having me this morning.

I was, of course, delighted to be asked to speak at London’s largest asset management conference.

And even better that I can be with you today in person, given this is the first time Funds Congress has met physically since 2020.

What a lot has changed since then. But what hasn’t changed is the vital importance the asset management industry holds for the UK and the global economy.

An engine for UK growth and long-term economic prosperity. A world leader in portfolio management and sustainable finance. The second largest asset management centre in the world with a market share higher than France, Germany and Switzerland combined. And an innovative spirit coupled with a diversity of expertise unrivalled anywhere to boot.

Growth: The role of the asset management

Before I come on to what we can achieve together, let us consider where we are today.

A major source of high value jobs in the UK – employing 42,000 people directly and supporting many tens of thousands in adjacent services.

A unique lynchpin of the UK financial services ecosystem, existing at the heart of many concentric circles of value in the industry across the UK.

But more importantly, the performance that you deliver to help lift up the standard of living of millions, tens of millions are benefitting today as they save for a pension through auto-enrolment.

You generate close to 1% of the UK’s GDP.

And 3.6% of total UK service exports.

But that data doesn’t do justice to your impact today, let alone what we could achieve.

And while we have the legacy to lead in this space, we can’t be complacent.

Productive Finance

As the Chancellor outlined in his Bloomberg Growth speech, we want the UK to be among the most prosperous countries in Europe.

We want to spur economic growth.

And we have a plan to get there.

I want to pay particular attention to the role of enterprise.

Within this, I want to highlight reward for risk, access to capital and smarter regulation.

Because enterprises need funding, just as all our long-term priorities do.

It’s why we’ve been working hard to better facilitate investment in long-term assets that will be a crucial ingredient in the UK’s economic success over the years ahead.

Because we all know that there are global and domestic priorities we need to tackle. It’s why we’re a leader in green finance, it’s why we are working to level up, it’s why we want to be the next Silicon Valley – but these priorities need to be funded.

Currently, the UK has the fourth largest pensions market in the world.

If we can unlock just a fraction of Defined Contribution pensions schemes’ capital for investment into productive finance assets, ordinary pension savers could retire with more security and money to enjoy.

And simultaneously, we would increase the supply of private finance for innovative companies, and productive assets.

When talking about productive UK assets I mean infrastructure, I mean growth, I mean venture capital.

It’s why the launch of the Long-Term Asset Fund – or LTAF – is such an important step in unleashing long-term investment.

At the beginning of December, I spoke about how, together, we have created the LTAF to help unlock access to long-term illiquid assets.

Our conclusion is that it will lead to a significant boost to the productive capacity of the UK economy – including much-needed infrastructure and decarbonisation products.

Because we know that client demand for illiquid investments is increasing. So it’s welcome that additional work such as the Productive Finance Working Group’s guides to illiquid investments is helping to set direction for DC pension schemes.

And I’m excited to hear of firms that are formally submitting their LTAF applications to the FCA.

It may sound like a niche, technical area to get animated over. But it’s far from it. It has the power to be transformative for our sector, the economy and society as a whole.

Funds Regime

The work on LTAFs is best understood alongside the wider work to review the UK’s funds regime.

Here our ambition is to further build on the UK’s world-leading position in asset management by making the UK a much more attractive place for funds to domicile.

And by ensuring the investors can access a suitably wide range of fund vehicles, so they can pursue the exciting investment strategies of tomorrow from the UK.

With your support and expertise we will continue striving to make this a reality. We will make the taxation of funds more efficient. We will expand the range of investment products available in the UK. And we will facilitate the kind of innovation which helps investors and the wider economy.

Global Opportunities

My responsibility is to ensure the UK financial services industry is the very best that it can be.

On making sure we have agile and effective regulation.

The Edinburgh Reforms take forward the government’s ambition for the UK to be the world’s most innovative, open and competitive global financial centre.

To drive growth and competitiveness in this crucial sector, while retaining our commitment to high international standards.

The Chancellor has committed to move rapidly to review retained EU law over the next year to identify reforms which have the greatest potential to unlock growth in key areas, including in financial services.

The Edinburgh Reforms themselves, of course, do not directly impact many of you here today. But what they show is our direction of travel: to use our new freedoms to tailor regulation to our industries and untether parts of our economy that have been held back.

To what end? To becoming the most innovative, productive, well-oiled financial services sector in the world that delivers for communities across all four nations of the UK.

I want to harness your strengths, unlocking institutional investment so that we can channel money to where it can do the most good: infrastructure, technology and innovation, the journey to net zero.

I want our country to be the best country in the world for businesses to invest, grow and flourish.

And I need your help in directing ever-more investment to these cutting edge-firms and long-term priorities.

On the subject of long-term priorities, could anything be more important than our country’s security?

It is my view that our security and freedom might just rely on our willingness to invest in defence over the long-term. So, I ask, as a sector, are we undervaluing defence and if so, what can each of us do about it?

FSM Bill

And the truth is we need to think long-term. We live in a globally competitive landscape. Our competitors are not taking a break.

Our Financial Services and Markets Bill, therefore, has competitiveness baked into it, aiming to enhance the UK’s position as a global leader in financial services.

The Bill introduces secondary statutory objectives for the PRA and the FCA to provide for a greater focus on growth and international competitiveness.

Technology

If we are to realise that ambition, we need to also ensure that UK financial services are at the forefront of technological advancements. To unlock the untapped potential new technology can bring to every town and city, and to grow the economy.

It’s already enabling us to embrace green finance – on which we want to lead the world – and exploit the great opportunities provided by AI, Quantum Computing.

And the asset management industry has the unique capability to harness the opportunities of innovative technologies, and one development I’d like to highlight is on digital assets – those made possible by the rise in blockchain technology.

We are establishing a framework for regulating cryptoassets and stablecoins.

This includes ensuring that the Treasury has the powers to regulate cryptoassets within the existing financial services framework which could cover those relating to the trading and investment of cryptoassets.

Just last week, we published a consultation setting out comprehensive proposals for regulating the sector.

At the end of last year, we made regulations to expand the Investment Manager Exemption tax rules to include transactions in cryptoassets, to remove disincentives to UK fund managers investing on behalf of overseas investors from including cryptoassets in their portfolios.

This will provide greater tax certainty for UK fund managers and foreign investors and put the UK at the forefront of the developing global cryptoasset fund management sector.

Sustainable Investments

Finally, I cannot speak about the global context without acknowledging ESG and the importance of sustainable investment.

I want the UK to be the best place in the world for sustainable finance and we have taken world-leading action to green the financial system.

London was recently ranked as the world’s leading hub for sustainable finance for the third consecutive time.

And I’m very proud that so many asset managers are signatories to the Financial Reporting Council’s Stewardship Code and members of the Net Zero Asset Managers Initiative – reflecting the importance the Government places on responsible and productive stewardship of capital.

Conclusion

I’ll end by repeating my thanks to you all for having me at the Funds Congress.

It’s an exciting time for asset management and we’re depending on this trusted industry to invest in the future of the UK.

I know we will work closely as we continue to promote growth and enable a competitive, thriving financial services sector. Thank you.