Speaker 1: Take the example of the United States population thirty five
Speaker 1: percent smaller than Europe GDP economy thirty five percent bigger,
Speaker 1: but equity markets ten times more liquid than the UK
Speaker 1: and Europe put together. So where does that come from?
Speaker 1: And I think it's good to be thinking about it.
Speaker 1: There's obviously again a new process that is started. Can
Speaker 1: we modify this rule or that rule. But fundamentally, you
Speaker 1: have a corporate funding environment that to the tune of
Speaker 1: more than eighty five percent, And the UK is in
Speaker 1: the same position as the rest of EU, as Europe
Speaker 1: is funded by bank lending, whereas the US funds its
Speaker 1: economy to the tune of eighty five percent from capital markets,
Speaker 1: mostly equities and arranged by the capital instruments, but only
Speaker 1: fifteen percent comes from bank lending. And it's the fundamental
Speaker 1: difference in approach where the UK and Europe have an
Speaker 1: economy funded mostly by debt, a downside focus bankruptcy, focus
Speaker 1: protection guarantees, focus funding environment, and where regulation and even
Speaker 1: more importantly fiscal policies subsidizes debt heavily but punishes equities.
Speaker 1: And it's that whole difference in culture that has been
Speaker 1: induced by many decades of fiscal and regulatory policy that
Speaker 1: has created the difference, and I think we're today at
Speaker 1: a point where some pretty thoughtful, radical reform is needed.
Speaker 1: There's no shortage of innovation, great academic institutions, technological entrepreneurial spirit, capital,
Speaker 1: all the ingredients are there, except for the fact that
Speaker 1: we can't scale them up. And you can't scale up
Speaker 1: the industries of the future, particularly tech, without far deeper
Speaker 1: equity markets.
Speaker 2: So then why is government not listening, not taking that advice?
Speaker 2: Why are they not going to be Edinburgh full?
Speaker 1: It drives essentially down to one element, which is in
Speaker 1: the ukn Europe, policy makers to control the distribution of
Speaker 1: capital to the corporate sector influence it. If you have
Speaker 1: a very oligopolistic, very concentrated banking industry dependent for its regulation,
Speaker 1: for its capital ratios on the central bank, there for
Speaker 1: the government, you're essentially of a government which is at
Speaker 1: the heart of a capital distribution system where it's not
Speaker 1: investors that make the decision on which technology is going
Speaker 1: to be scaled up. Ultimately it has to go to
Speaker 1: the banking sector.
Speaker 2: While did you think that the conversation in the UK
Speaker 2: specifically has reached this crescendo point. Why is it now
Speaker 2: that you know we hear much more from business about
Speaker 2: this now about the possibility of chay.
Speaker 1: Because I believe that the UK has a lot more
Speaker 1: to lose than the rest of Europe. London was an
Speaker 1: undisputed global financial hub, a leader, if not the number
Speaker 1: one in my opinion, it was number one in many areas.
Speaker 1: And we're now seeing in some areas some of that
Speaker 1: leadership being frittered away, going away, and those are the numbers.
Speaker 1: This is not a political debate, this is a technical debate.
Speaker 1: So there are those who are part of building that
Speaker 1: global leadership, building the global compression engine and interest rates
Speaker 1: to what Clearing at the London Clearinghouse was not an
Speaker 1: easy thing to do. This goes back to twenty fifteen
Speaker 1: and sixteen. LCCH became the biggest clearing house in the world,
Speaker 1: the biggest financial complex. And when you see those advantages
Speaker 1: being frittered away, a lot of the folks that work
Speaker 1: incredibly hard to secure this advantage, some of them start
Speaker 1: speaking out.
Speaker 2: The fifty billion pound fund for investment, the Lord Meth
Speaker 2: the City of London, Nicholas Lines proposed it, Labor had
Speaker 2: backed it. There is this idea that this money would
Speaker 2: take pension fund investment cash and then push it towards
Speaker 2: growth businesses. It seems to have some backing. Others are
Speaker 2: quite critical. Again, is that tinkering in terms of opinions.
Speaker 1: They're plentiful and they're cheap. But US equity markets trade
Speaker 1: seven hundred billion dollars every day. The whole of the
Speaker 1: UK and Europe trade seventy billion, So there is no
Speaker 1: lack of capital in Europe. There is no lack of
Speaker 1: great technologies. The UKs some of the most fantastic universities
Speaker 1: in the world. As a great deal of entrepreneurial spirit.
Speaker 1: There is no problem with the startup economy, but we're
Speaker 1: not freeing, unleashing the full power of equity markets. And
Speaker 1: equity markets are essentially private investors, institutional investors, pension funds,
Speaker 1: insurance companies making the bets for the future, for future growth.
Speaker 1: That is the power that we risk eschewing. If we
Speaker 1: look at government driven solutions, where public money again gets
Speaker 1: in a fairly minor fashion ere marked to fund technology,
Speaker 1: it's not the way this works.