WEBVTT - Are Financial Regulators Looking the Wrong Way? 0:00:00.200 --> 0:00:02.760 David's big year for elections across the world, and also 0:00:02.800 --> 0:00:03.760 there is one here in the UK. 0:00:04.519 --> 0:00:07.520 The polls seem to be narrying though turn on with labor, 0:00:07.640 --> 0:00:11.120 maybe it's not going to be as massive a landslide 0:00:11.160 --> 0:00:14.080 the laborers as we were thinking, and. 0:00:14.040 --> 0:00:16.639 Then has all sorts of implications. Now the City of 0:00:16.640 --> 0:00:19.160 London is also trying to figure out now what they've 0:00:19.160 --> 0:00:23.160 gained from fourteen years of Conservative leadership and what. 0:00:23.239 --> 0:00:25.840 Might happen if we're do in you get a change 0:00:25.880 --> 0:00:27.640 of administration in the coming months. 0:00:29.200 --> 0:00:31.920 Welcome to In the City, Bloomberg's podcast, connecting you to 0:00:31.960 --> 0:00:34.760 the conversations and the stories shaping the world of finance. 0:00:35.400 --> 0:00:37.800 I'm David Merritt and I'm Fronci lack One and this 0:00:37.920 --> 0:00:40.440 week we have with us Miles sell It, the chief 0:00:40.479 --> 0:00:44.280 executive officer at the City UK. That's the trade body 0:00:44.320 --> 0:00:47.279 which represents financial professional services here in the UK. 0:00:48.240 --> 0:00:50.360 Miles, thank you for joining us, Thanks very much for 0:00:50.440 --> 0:00:52.600 inviting me. I mean, this is a big year for 0:00:52.800 --> 0:00:55.080 UK business as they try and figure out what a 0:00:55.120 --> 0:00:57.880 possible labor government means for them. How have the Tories 0:00:57.920 --> 0:00:58.440 done so far? 0:00:59.000 --> 0:01:01.960 The Tories clearly are struggling the polls. We had a 0:01:01.960 --> 0:01:04.720 dinner with some Conservative candidates last night. I think they 0:01:04.840 --> 0:01:07.800 were determined. You know, they followed the mooded well, determined. 0:01:07.840 --> 0:01:09.840 They felt that the mood in their patch was you know, 0:01:09.880 --> 0:01:12.560 it was not reflective of where the polls were, but 0:01:12.720 --> 0:01:15.160 you know, or well, I mean, it was certainly not 0:01:15.520 --> 0:01:17.400 for me to just determine whether or not they're own 0:01:17.440 --> 0:01:20.000 denial or not. But there was a sense of, look, 0:01:20.000 --> 0:01:22.560 they've got a you know, they've got a tough mountain 0:01:22.600 --> 0:01:26.280 to climb, but they are clearly on the in Westminster 0:01:26.360 --> 0:01:29.200 and Whitehall and in the constituencies. They are moving towards 0:01:29.360 --> 0:01:32.200 election mode. They're moving towards knocking on doors. From our 0:01:32.240 --> 0:01:35.199 point of view in industry, really whoever wins the next 0:01:35.240 --> 0:01:37.920 general election. From the point of view of financial and 0:01:37.959 --> 0:01:42.320 professional services, there's a lot of continuity about That was 0:01:42.360 --> 0:01:44.080 one of the big things that Labor pushed at their 0:01:44.080 --> 0:01:47.720 recent business conference. There's a lot of consistency in policy 0:01:47.760 --> 0:01:49.840 and certainly what we're hearing from international investors. I was 0:01:49.880 --> 0:01:52.480 in Hong Kong and Shanghai a couple of weeks ago 0:01:52.880 --> 0:01:55.640 is is actually there's it seems to be pretty much 0:01:55.640 --> 0:01:58.080 business as usual from the point of view of sort 0:01:58.120 --> 0:02:00.000 of macro policy in this kind of space. 0:02:00.480 --> 0:02:02.960 I mean, all the wobbles this week with labor polls 0:02:03.080 --> 0:02:05.520 narrowed quite a bit, I do wonder a little bit 0:02:05.560 --> 0:02:07.440 at how much of this really breaks through. I'm a 0:02:07.480 --> 0:02:08.480 little bit more uncertain. 0:02:08.720 --> 0:02:10.400 I don't know, as I say, at the stinner with 0:02:10.440 --> 0:02:13.400 the Tory PPCs. The start of it was all, you know, 0:02:13.560 --> 0:02:15.480 it's all right on my patch, that doesn't fit with 0:02:15.520 --> 0:02:18.440 the polls. By the end of it was a slightly different, Yeah, 0:02:18.520 --> 0:02:20.919 slightly different equation. I think they're expecting quite a few 0:02:20.960 --> 0:02:22.760 of them are expecting a bit of a battery. 0:02:23.040 --> 0:02:25.959 If we get But the landslide scenario is well, that's okay, 0:02:26.000 --> 0:02:28.440 we flip to labor, but at least it's secure and stable. 0:02:28.480 --> 0:02:31.040 But there's another outcome potentially, which is it's a bit 0:02:31.080 --> 0:02:32.440 closer and we have a hung parliament. 0:02:32.480 --> 0:02:35.840 This is the thing that worries industry and investors, which 0:02:36.160 --> 0:02:38.760 is that if you end up with a narrow labor majority, 0:02:38.840 --> 0:02:43.119 or no majority at all, or maybe king makers, you're 0:02:43.160 --> 0:02:45.800 back to the political risk and the political instability. So 0:02:45.960 --> 0:02:47.919 if there is going to be a decision, I think 0:02:48.040 --> 0:02:49.920 certainly the members we speak who would rather that it 0:02:49.960 --> 0:02:52.639 was a decisive result. So you end up with Labor 0:02:52.639 --> 0:02:55.720 with fifty sixty or more in a majority, or if 0:02:55.760 --> 0:02:57.600 it's the Tories with fifty or sixty more. But that 0:02:57.840 --> 0:03:01.800 doesn't look likely. So it's much much better to have consistency, 0:03:01.840 --> 0:03:04.840 clarity and a direction of travel. And as I say, genuinely, 0:03:05.880 --> 0:03:07.600 most of the people we speak to don't see that 0:03:07.680 --> 0:03:10.320 much of a difference in the big picture stuff. Carrie 0:03:10.360 --> 0:03:12.040 will be there to a certain degree. We'll see how 0:03:12.080 --> 0:03:14.280 that happens. The non dom things will be there to 0:03:14.360 --> 0:03:16.119 a certain degree. We'll see how that plays through. 0:03:16.160 --> 0:03:19.359 But prival private school fees, you know what, private. 0:03:19.000 --> 0:03:22.240 School fees get so much cut through. So genuinely, I 0:03:22.240 --> 0:03:24.240 was talking to this businessman in Hong Kong who sent 0:03:24.360 --> 0:03:27.960 his kids to UK private schools and then UK universities, 0:03:28.400 --> 0:03:31.120 and he said, you guys are getting complacent because this 0:03:31.200 --> 0:03:34.320 is substantially increasing the cost. So it would would have 0:03:34.360 --> 0:03:36.520 made me think twice, he said about sending the kids 0:03:36.520 --> 0:03:38.240 to a private school. So now I think that one's 0:03:38.240 --> 0:03:40.400 going to get more I think more difficult. 0:03:40.440 --> 0:03:42.960 It's the one policy that Rachel they're sticking. I mean 0:03:43.000 --> 0:03:44.640 they talk about it all the time, because obviously it 0:03:44.640 --> 0:03:48.720 has political cut through, yes, and domestically and fiscally, it's 0:03:48.760 --> 0:03:50.640 not going to make a huge amount of difference, yeah, 0:03:50.680 --> 0:03:51.160 but it won't be. 0:03:51.200 --> 0:03:53.160 As huge, won't be making what I can't see that 0:03:53.200 --> 0:03:55.160 makes a huge amount of money. I suspect you end 0:03:55.280 --> 0:03:57.440 up with a bunch of people dropping out of dropping 0:03:57.440 --> 0:03:59.080 their kids out of the private schools, the ones you'll 0:03:59.080 --> 0:04:01.680 throw on the edge of afford of But it doesn't 0:04:01.920 --> 0:04:05.080 raise a life changing amount of money from a government's perspective. 0:04:05.560 --> 0:04:07.400 But I think it does have a potential impact just 0:04:07.440 --> 0:04:09.720 from the conversations we've had at least with some people 0:04:09.760 --> 0:04:12.200 in terms of how they look at the UK, and 0:04:12.240 --> 0:04:16.160 I think that sort of sense of the political driver 0:04:16.800 --> 0:04:18.960 on that being it's one of those things that plays 0:04:18.960 --> 0:04:21.760 well to the labor base, but also plays well to 0:04:21.800 --> 0:04:23.840 the sense that people at the upper end of the 0:04:23.839 --> 0:04:27.279 income scale have done very well over recent years and 0:04:27.920 --> 0:04:30.360 if there are going to be tax changes over the 0:04:30.400 --> 0:04:32.960 coming years, I suspect the polling would show that they 0:04:33.040 --> 0:04:34.600 support that lands on those with a ship with the 0:04:34.600 --> 0:04:36.840 broader shoulders. 0:04:36.880 --> 0:04:38.640 I guess the question is we don't really have the 0:04:38.880 --> 0:04:42.320 policies right in terms of corporate taxation from labor. Yet 0:04:42.320 --> 0:04:44.120 we don't really know what they do with carried interest. 0:04:44.200 --> 0:04:46.120 So at the moment there's been a big push and 0:04:46.160 --> 0:04:48.919 we've seen that through all of our reporting day that 0:04:48.960 --> 0:04:52.840 their labor wants to woo business without giving too much details. 0:04:52.920 --> 0:04:54.040 Yeah, it's a bit thin, isn't it. 0:04:54.440 --> 0:04:56.880 I thought the Business conference was interesting, so I think 0:04:56.880 --> 0:05:01.159 the big headline from that was Rachel Reeves's commitment corporation tax. 0:05:01.240 --> 0:05:03.400 So she said headline rate will remain at twenty five 0:05:03.440 --> 0:05:06.640 percent and they're going to go for the stability piece. 0:05:07.120 --> 0:05:09.120 One of the things we've been saying to government and 0:05:09.200 --> 0:05:11.480 to the opposition for a while is actually when George 0:05:11.480 --> 0:05:13.880 Osborne was Chancelly, he had this commitment that the UK 0:05:13.920 --> 0:05:15.960 would always be in the bottom quartile of the G 0:05:16.040 --> 0:05:19.320 eight on corporation tax and that just helped with tax planning. 0:05:19.360 --> 0:05:21.760 You kind of knew which direction things were going in. 0:05:21.800 --> 0:05:23.600 It just made life a little bit easier in terms 0:05:23.600 --> 0:05:27.720 of anticipation. But the reality is you've got debt at 0:05:27.800 --> 0:05:30.440 high levels. Although I think sometimes the UK story is 0:05:30.520 --> 0:05:32.880 slightly overdone. I think we are the second lowest debt 0:05:33.000 --> 0:05:35.440 GDP ratio in the G seven, but it's clearly pretty 0:05:35.480 --> 0:05:40.040 high by historical standards. There's whoever wins the next general election, 0:05:40.080 --> 0:05:42.719 there's going to be a demand to invest in infrastructure, 0:05:43.000 --> 0:05:46.480 in public services, so health, in schools. There's the need 0:05:46.520 --> 0:05:49.360 to re arm which seems to be a cross party basis. 0:05:49.480 --> 0:05:51.279 And this isn't just something that we're seeing in the UK, 0:05:51.440 --> 0:05:54.240 this is across the West. So what gives There's not 0:05:54.320 --> 0:05:57.360 much room really to increase debt. They seem to have 0:05:57.360 --> 0:06:00.880 closed off increases in taxation. Our senses there will be 0:06:00.920 --> 0:06:02.960 a dash for growth and that certainly seems to be 0:06:03.000 --> 0:06:05.240 the approach that Labour's taking. I suspect that will be 0:06:05.279 --> 0:06:07.120 what the Tories will have to go for as well, 0:06:07.560 --> 0:06:10.000 and that brings it industries like ours into play. So 0:06:10.080 --> 0:06:13.200 what can you do in terms of unlocking the investment 0:06:13.240 --> 0:06:15.440 that potentially sits in the private sector on things like 0:06:15.480 --> 0:06:18.080 green finance and the shift to net zero, but also 0:06:18.160 --> 0:06:22.040 potentially on driving things such as reinvestment and infrastructure and elsewhere. 0:06:22.080 --> 0:06:23.720 So there's not much space, is that? I mean you 0:06:23.720 --> 0:06:26.320 talked about the pro going for greath We can't slash 0:06:26.360 --> 0:06:29.120 taxes and ramp up spending in those ways. So there's 0:06:29.160 --> 0:06:30.360 not much in it, is there? Yeah? 0:06:30.400 --> 0:06:32.640 I mean, what one thing I'd say is, and full 0:06:32.680 --> 0:06:35.000 credit to the Prime Minister and the Chancellor. I think 0:06:35.040 --> 0:06:38.000 they have to a certain degree, to a very large degree, 0:06:38.040 --> 0:06:41.800 sort of reclaimed the UK's reputation for stability. And you know, 0:06:41.839 --> 0:06:43.719 one of the things the UK is sort of historically 0:06:43.800 --> 0:06:45.040 had is this sort of sense of you know, we're 0:06:45.080 --> 0:06:48.159 a bit boring and predictable and you'll get a slight, yeah, 0:06:48.279 --> 0:06:50.560 slightly better return here than elsewhere. 0:06:50.240 --> 0:06:53.120 And they call it the more on premium. That was it, yea, 0:06:54.279 --> 0:06:55.960 And many talks to people in Singapore, I mean, do 0:06:55.960 --> 0:06:58.320 you think the more the more on premium is gone. 0:06:58.640 --> 0:07:01.440 I think there is definitely a that the UK is 0:07:01.640 --> 0:07:04.159 back into a more stable, more predictable place. And I 0:07:04.160 --> 0:07:07.320 think it's also it's not just what happened over that summer, 0:07:07.360 --> 0:07:10.320 that sort of quasi qua tengles trust summer. There is 0:07:10.320 --> 0:07:13.480 no getting away from the fact that Brexit created a 0:07:13.520 --> 0:07:15.840 space where the UK was seen as politically, you know, 0:07:16.040 --> 0:07:19.080 much too exciting and unpredictable. You then had the twenty 0:07:19.120 --> 0:07:21.680 seventeen general election, which brought the possibility of a Corbin 0:07:21.760 --> 0:07:24.280 government into play. You could even go further back and 0:07:24.280 --> 0:07:27.200 say you look at twenty fourteen in the Scottish independence referendum. 0:07:27.320 --> 0:07:31.960 The UK has been historically unusually politically interesting. We did 0:07:32.000 --> 0:07:34.880 a dinner with some Italian counterparts a couple of years ago, 0:07:35.800 --> 0:07:38.360 and at the end of the dinner, one of the 0:07:39.000 --> 0:07:40.880 Italians stood up and he said, I'd like to propose 0:07:40.920 --> 0:07:43.440 a toast of thanks to our British friends for swapping 0:07:43.480 --> 0:07:44.520 their politics with ours. 0:07:45.200 --> 0:07:48.040 And it was the economist. Did that covered the upset. 0:07:48.120 --> 0:07:49.960 Upset all Italians. 0:07:51.440 --> 0:07:52.960 And I think everyone's. 0:07:52.960 --> 0:07:54.680 I'm sorry you don't have you know, as good as 0:07:54.720 --> 0:08:00.720 pastors or the weather Franklinbridge. But I guess the question 0:08:01.120 --> 0:08:03.760 is when you look at the numbers, if you look 0:08:03.800 --> 0:08:07.520 at what happened to servicing debt pre COVID and then 0:08:07.760 --> 0:08:11.360 because of inflation, I think debt servicing costs are about 0:08:11.400 --> 0:08:14.960 fifty billion pounds higher than pre pandemic days. So to 0:08:15.040 --> 0:08:18.440 your point, I don't see how any party can actually 0:08:18.480 --> 0:08:22.360 cut taxes unless you go into austerity again. 0:08:22.440 --> 0:08:25.360 Yeah, I think it's very difficult to see where tax 0:08:25.440 --> 0:08:29.040 cuts come from, and certainly I don't think that growth 0:08:29.080 --> 0:08:31.160 can only be driven by tax cuts. In any case, 0:08:31.480 --> 0:08:33.040 I think what's interesting is actually if you look at 0:08:33.040 --> 0:08:35.880 the United States, where you've had the Chips Act and 0:08:35.920 --> 0:08:38.720 you had the Inflation Reduction Act. You know, the US 0:08:38.800 --> 0:08:42.360 is going gangbusters in terms of economic growth at the moment, 0:08:43.000 --> 0:08:46.199 and that is a very active utilization of the state. 0:08:46.720 --> 0:08:48.880 And it was the same in many ways, actually, ironically 0:08:48.960 --> 0:08:51.000 enough under Trump, very similar approach under. 0:08:51.000 --> 0:08:52.439 We can't do that here, can we. And we've just 0:08:52.480 --> 0:08:55.040 seen this with labor having to row back their green 0:08:55.080 --> 0:08:58.080 spending because sums don't add up here. We can't you know, 0:08:58.080 --> 0:09:00.920 we're not the United States. We can't lurge the cash. 0:09:01.760 --> 0:09:04.440 Although whenever we raise this government government makes the point 0:09:04.440 --> 0:09:06.640 that if you look at the overall level of subsidies 0:09:06.679 --> 0:09:09.800 and support across the piece on green that actually it's 0:09:09.840 --> 0:09:12.679 a comparable amount of GDP. Now that's fine, but it's 0:09:12.679 --> 0:09:15.040 a GDP of two point eight trillion versus a GDP 0:09:15.160 --> 0:09:18.240 of nearly ten times that, so the impact is different. 0:09:18.280 --> 0:09:20.480 That's also had an impact on capital markets. It's sort 0:09:20.480 --> 0:09:23.160 of dragged a huge amount of investment into the US 0:09:23.200 --> 0:09:26.040 and a huge amount of business into the US. But 0:09:26.120 --> 0:09:28.520 I think there is this point about the role of 0:09:28.559 --> 0:09:30.680 the state as we move forward. We were talking to 0:09:30.760 --> 0:09:33.040 one of the people advising labor a little while ago, 0:09:33.120 --> 0:09:35.199 and he said we're moving towards something that he termed 0:09:35.240 --> 0:09:37.720 the fourth Way. So we've kind of had Tony Blair's 0:09:37.720 --> 0:09:39.640 Third Way, and he I don't think this is a 0:09:39.679 --> 0:09:42.920 sort of trademark Keir Starmer moment where he put it 0:09:43.000 --> 0:09:45.280 was that this is the fourth way, which is an 0:09:45.360 --> 0:09:50.920 active interventionist state working in partnership with dynamic free markets. 0:09:51.000 --> 0:09:52.840 They've just dialed it back. I mean, were you disappointed 0:09:52.840 --> 0:09:55.120 to see that ambition scaled back? 0:09:55.400 --> 0:09:58.720 So? I think I think that was a very sensible approach, 0:09:58.800 --> 0:10:02.760 that it was the boring approach. Rachel Reeves turned around 0:10:02.800 --> 0:10:05.000 and said, we made this commitment under a different set 0:10:05.040 --> 0:10:07.720 of circumstances to your point, France, seeing the debt servicing 0:10:07.800 --> 0:10:10.120 levels were very different, where therefore having to look at 0:10:10.120 --> 0:10:12.160 what we do in terms of how we move forward. 0:10:12.200 --> 0:10:15.280 I don't think that there is a reduction in the 0:10:15.320 --> 0:10:17.840 commitment to net zero from that. I think it's just 0:10:17.880 --> 0:10:19.600 they're looking at how they do that in different ways 0:10:19.840 --> 0:10:21.960 comes work. But I think it also therefore points to 0:10:22.040 --> 0:10:24.040 what do you do in terms of blended finance. You know, 0:10:24.080 --> 0:10:26.200 I was at COP twenty eight in November, as I'm 0:10:26.240 --> 0:10:28.160 sure you guys were One of the big things that 0:10:28.200 --> 0:10:30.720 came out of that discussion was how do you utilize 0:10:30.760 --> 0:10:34.000 how do you harness the private sector in service of 0:10:34.080 --> 0:10:37.440 driving green and sustainable finance, the move to net zero adaptation, 0:10:37.520 --> 0:10:37.959 et cetera. 0:10:38.320 --> 0:10:40.480 But isn't there a bigger concern here of what the 0:10:40.520 --> 0:10:43.199 city of London becomes? So you know, at your annual 0:10:43.200 --> 0:10:46.680 dinner the chanswer was saying, well, the UK and actually 0:10:46.720 --> 0:10:48.600 the City of London needs to become the next Nasdak. 0:10:48.640 --> 0:10:50.880 We're going to focus on technology. I mean, he may 0:10:50.920 --> 0:10:53.360 not be transfer for much longer. I don't know whether 0:10:53.559 --> 0:10:56.439 technology and green bond is going to be the thing 0:10:56.440 --> 0:10:57.600 that labor Wan to harness. 0:10:57.840 --> 0:11:00.280 So that's absolutely where I think we're heading towards. It 0:11:00.360 --> 0:11:02.640 is this sort of sense of a high tech economy 0:11:02.720 --> 0:11:05.920 based on high amounts of innovation that'll require, in our view, 0:11:05.960 --> 0:11:10.640 a different approach on regulation. So the regulatory approach historically 0:11:10.679 --> 0:11:13.560 on tech, on data, as before in migration and potentially 0:11:13.640 --> 0:11:15.600 on migration. We've got to be able to attract the 0:11:15.600 --> 0:11:17.800 best in the world here, and we've also got to 0:11:17.840 --> 0:11:20.240 be able to recruit from the best in from the 0:11:20.240 --> 0:11:21.840 best in the UK as well. So it's not just 0:11:21.840 --> 0:11:24.319 about bringing people in. It is about to use the 0:11:24.400 --> 0:11:25.680 term growing our own timber. 0:11:26.000 --> 0:11:27.959 Can we really compete though? Here? I mean it's good 0:11:27.960 --> 0:11:30.360 to hear the chance to talk about the focus on tech. 0:11:30.600 --> 0:11:32.559 We've been looking at the results we've been seeing from 0:11:32.559 --> 0:11:34.480 the tech for you know, the massive numbers coming out 0:11:34.480 --> 0:11:36.040 in the United States. And the one that really struck 0:11:36.040 --> 0:11:39.040 me was looking at arm which so doubled in price. 0:11:39.320 --> 0:11:42.920 Now this is a British company, British founded and chose 0:11:42.960 --> 0:11:45.440 to list in America and it's ripping the rewards now 0:11:45.520 --> 0:11:47.480 the share price. I think it's now worth something like 0:11:47.480 --> 0:11:49.720 one hundred and fifty or so billion dot it's one 0:11:49.760 --> 0:11:52.680 of the biggest capped companies now Britain. It chose to 0:11:52.720 --> 0:11:55.920 go and list in America. It made that decision. I mean, 0:11:56.160 --> 0:11:59.559 how can we capture the talent that's here, capture the 0:11:59.559 --> 0:12:01.600 potential and stop it flowing over it? 0:12:01.880 --> 0:12:05.160 So I'm a little more positive actually on that. So firstly, 0:12:05.200 --> 0:12:07.920 if you look at fintech, there are three major fintech 0:12:07.920 --> 0:12:10.880 industries globally, It's the US, It's China, It's the UK. 0:12:10.960 --> 0:12:14.040 It's the same with AI US China, UK. And if 0:12:14.040 --> 0:12:16.000 you look at the lead the UK's got in Europe, 0:12:16.080 --> 0:12:18.800 it's often way ahead most years in terms of investment, 0:12:18.800 --> 0:12:19.720 it's way ahead of France. 0:12:19.760 --> 0:12:21.920 Germany would push back against that. 0:12:22.000 --> 0:12:24.560 The French wood and you can point to certain surveys 0:12:24.600 --> 0:12:28.400 about the number of companies and technology and also the 0:12:28.480 --> 0:12:30.920 number of investments they've had, but the amount, the actual 0:12:31.000 --> 0:12:34.040 quantum that the UK continues to be ahead, and I 0:12:34.080 --> 0:12:36.320 think the UK is still a much more attractive place. 0:12:36.360 --> 0:12:38.760 It has the advantage of the university, so we are 0:12:38.760 --> 0:12:41.959 the second biggest number of top one hundred universities anywhere 0:12:41.960 --> 0:12:43.520 in the world, which for a country of fewer than 0:12:43.559 --> 0:12:47.040 seventy million people is still pretty impressive. You can look 0:12:47.040 --> 0:12:48.480 at the number of people who are coming in as 0:12:48.520 --> 0:12:51.240 foreign students. The UK continues to be a really attractive 0:12:51.240 --> 0:12:53.439 place to come as a foreign student, second only to 0:12:53.480 --> 0:12:56.079 the US and arguably in some ways ahead. So I 0:12:56.120 --> 0:12:58.840 think the talent piece is absolutely critical. You've raised a 0:12:58.840 --> 0:13:01.320 really important point on value. I think ARM is a 0:13:01.320 --> 0:13:04.240 fantastic success story. I mean full credit to the guys there, 0:13:04.440 --> 0:13:07.120 but actually if you look at UK companies that operate 0:13:07.160 --> 0:13:10.199 predominantly in the UK who list in the US, typically 0:13:10.520 --> 0:13:15.080 eighteen to twenty four months after initial listing, their valuation 0:13:15.200 --> 0:13:17.840 is below that of their American counterparts. So it's a 0:13:17.840 --> 0:13:21.720 more complex story than I think is sometimes pointed to males. 0:13:22.000 --> 0:13:25.880 What does the City of London financial Services actually want 0:13:25.960 --> 0:13:28.480 from labor right now? Is there a danger that if 0:13:28.640 --> 0:13:31.400 you know, a Chancellor and then a Prime Minister that 0:13:31.640 --> 0:13:35.680 understood hedge funds, that understood Wall Street couldn't get it right, 0:13:36.320 --> 0:13:38.520 that whoever comes next, you know, has even less of 0:13:38.520 --> 0:13:38.959 a chance. 0:13:39.200 --> 0:13:41.040 So I said, the first thing we wanted we'd got, 0:13:41.080 --> 0:13:44.240 which was continuity on the Financial Services Markets Act and 0:13:44.280 --> 0:13:47.480 the Edinburgh Reforms and the Mansion House reforms. And every 0:13:47.520 --> 0:13:50.200 time you know, we at City UK or our members 0:13:50.280 --> 0:13:53.400 see Rachel Reeves or Tulip Cidik or Darren Jones, they 0:13:53.400 --> 0:13:56.320 are at pains to stress. And their Financial Services Report 0:13:56.360 --> 0:13:57.800 that came out a couple of weeks ago said the 0:13:57.800 --> 0:14:00.720 same thing. This is about continuity on the Findinancial Services 0:14:00.800 --> 0:14:03.319 and Markets Act on a more specific basis for. 0:14:03.280 --> 0:14:04.840 Five years, right, That's what they pledged. 0:14:04.960 --> 0:14:07.480 So I think it was more that they will continue 0:14:07.559 --> 0:14:09.439 to push the reforms that have been set forward. I 0:14:09.440 --> 0:14:11.480 think that the key thing in terms of where the 0:14:11.559 --> 0:14:13.800 rubber hits the road on This isn't actually the legislation, 0:14:14.000 --> 0:14:16.240 it's the way that the regulators are now held to 0:14:16.280 --> 0:14:19.440 account on things such as the secondary objective on economic 0:14:19.480 --> 0:14:24.800 growth and competitiveness. So recently, the Sexual State for Business 0:14:24.800 --> 0:14:27.080 and Trade, Kemmy Badnock, had an exchange of letters with 0:14:27.120 --> 0:14:30.479 the new CEO of the Financial Reporting Council, Richard Moriarty, 0:14:31.520 --> 0:14:35.040 talking about how they both wanted to hardwire competitiveness into 0:14:35.080 --> 0:14:38.200 the way the FRC works. We thought that was a 0:14:38.240 --> 0:14:41.560 critical element in terms of the Financial Services and Markets Act, 0:14:41.600 --> 0:14:44.760 that the FCA and the PRA are held to account 0:14:44.800 --> 0:14:48.120 on how they implement that secondary objective, because otherwise it's 0:14:48.160 --> 0:14:51.200 just there on paper. It will always potentially fall by 0:14:51.200 --> 0:14:53.720 the wayside when something more urgent comes up. But if 0:14:53.720 --> 0:14:55.200 you're going to deal with the sort of things we 0:14:55.200 --> 0:14:57.840 were talking about earlier, which is economic growth, which is 0:14:57.920 --> 0:15:01.480 investment in public services, in preases, in defense spending, et cetera, 0:15:01.520 --> 0:15:04.560 et cetera, et cetera, and you're not increasing taxes and 0:15:04.600 --> 0:15:07.320 you're not increasing debt, the only way you get this 0:15:07.360 --> 0:15:09.040 is growth. And we are one of the you know, 0:15:09.040 --> 0:15:11.160 there's just no getting away from this. Isn't me you know, 0:15:11.200 --> 0:15:13.520 sort of waving the flag for financial services. It's just 0:15:13.560 --> 0:15:16.800 an economic reality. Our industry's got to be a critical 0:15:16.840 --> 0:15:19.280 part of delivering that nationally and at sort of regional 0:15:19.360 --> 0:15:22.720 level as well. So the KPI is the key performance 0:15:22.720 --> 0:15:25.360 indicators that have been put forward on that are the 0:15:25.360 --> 0:15:27.920 critical element. The government's doing some work on that at 0:15:27.960 --> 0:15:30.320 the moment. How labour then acts when they get in, 0:15:30.400 --> 0:15:33.160 the approach they take to those and the approach they 0:15:33.160 --> 0:15:36.760 take to the way that you incentivize risk and growth 0:15:36.760 --> 0:15:38.200 in the economy is going to be critical. 0:15:38.840 --> 0:15:41.760 Are there any specific measures that you can see down 0:15:41.800 --> 0:15:43.360 the pipe that are going to really help that. How 0:15:43.400 --> 0:15:47.200 can the capital markets really expand in this country? How 0:15:47.240 --> 0:15:49.760 can the liquidity levels deepen, How can there be more 0:15:49.800 --> 0:15:54.240 appetite for risk? And the London Stock Exchange reverse this 0:15:54.360 --> 0:15:56.520 decline it's been in terms of the size of its market. 0:15:56.960 --> 0:15:59.240 Yeah, and look, the sort of thing here is that 0:15:59.360 --> 0:16:01.880 you've got to make a different approach on risk and 0:16:01.960 --> 0:16:04.640 how that incentivizes growth. And one of the problems that 0:16:04.680 --> 0:16:06.760 we've got at the moment is that the regulator's fair 0:16:06.800 --> 0:16:09.680 play to the regulator. We have genuinely fantastic regulators here 0:16:09.720 --> 0:16:12.560 in the UK, but they are not incentivized to do 0:16:12.640 --> 0:16:16.440 anything other than prevent things from going wrong. So if 0:16:16.440 --> 0:16:18.080 you look at I'm probably not going to win myself 0:16:18.120 --> 0:16:20.360 for self any friends at the Treasury Select Committee on 0:16:20.400 --> 0:16:23.360 this one. This may be my first and last appearance 0:16:23.400 --> 0:16:27.840 on your podcast. So the you know where nikkil Ratty 0:16:28.440 --> 0:16:31.920 or Sam Woods go to the Treasury Select Committee. Typically 0:16:31.960 --> 0:16:33.680 the questions they get from the members of the Treasury 0:16:33.680 --> 0:16:36.800 Select Committee aren't what are you doing to drive competitiveness? 0:16:36.840 --> 0:16:38.400 They aren't what are you doing to drive growth? They 0:16:38.400 --> 0:16:41.160 are my constituents just lost two hundred and fifty quid 0:16:41.200 --> 0:16:42.200 on something, what are you going to do? In the 0:16:42.280 --> 0:16:44.800 subar Protect show, it's consumer and it's important, which is 0:16:44.920 --> 0:16:47.320 hugely important, and I am in no way denigrating that, 0:16:47.640 --> 0:16:49.800 but it is important that we strike the right balance 0:16:49.840 --> 0:16:52.800 between looking after consumers and the retail end of this 0:16:53.200 --> 0:16:56.280 and making sure that we are incentivizing and giving regulators 0:16:56.320 --> 0:16:59.040 the air cover to go in and actually drive growth. 0:16:59.040 --> 0:17:00.880 And I think Nikil gets and I think the team 0:17:00.920 --> 0:17:03.840 around him get it, but that is not always the 0:17:03.880 --> 0:17:05.960 lived experience, if you like, If I can use that 0:17:06.080 --> 0:17:08.840 term in terms of the supervisory visits and the enforcement 0:17:08.920 --> 0:17:12.399 visits that companies get from their data dating centervizing. 0:17:12.480 --> 0:17:14.399 I mean, is it through ices? Is it UK ices? 0:17:14.400 --> 0:17:16.199 I know we have the UK isis this came up 0:17:16.200 --> 0:17:19.680 at your events, didn't it? This idea that most countries 0:17:19.720 --> 0:17:21.919 would give a tax break to people to invest in 0:17:21.960 --> 0:17:24.120 funds that might actually invest back into the UK. Yeah. 0:17:24.119 --> 0:17:26.880 The Canadians are like the poster child on this. So 0:17:26.960 --> 0:17:28.800 the British er I think if we end up with 0:17:28.840 --> 0:17:31.159 something like a British icer, of which we would be 0:17:31.240 --> 0:17:33.880 hugely supportive, it could well be based on what they've 0:17:33.920 --> 0:17:35.520 done in Canada, which is exactly you say, there's a 0:17:35.520 --> 0:17:39.240 sort of different tax wrapper on those sorts of investments. 0:17:39.240 --> 0:17:41.399 And you've got to look also at what's happened in 0:17:41.440 --> 0:17:43.320 the UK. You touched on the sort of liquidity and 0:17:43.320 --> 0:17:45.680 the depth of the capital markets. If you look at 0:17:45.760 --> 0:17:51.240 the proportion of British household assets that are in equities, 0:17:51.760 --> 0:17:54.440 it's about eleven percent in the UK, In the US, 0:17:54.480 --> 0:17:56.920 it's north of forty In France and Germany, which aren't 0:17:56.920 --> 0:18:01.360 considered great sort of shareholding democracies of thirty. The UK 0:18:01.440 --> 0:18:03.800 has fallen behind on this. It's a point we've raised 0:18:03.800 --> 0:18:06.199