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The Guardian
4 days ago
- Business
- The Guardian
Time over for banker remorse? Labour must beware relying on the City for economic growth
'There was a period of remorse and apology for banks and I think that period needs to be over.' So said Bob Diamond, the eight-figure-earning Barclays chief executive more than a decade ago. 'We need our banks willing to take risks, to be confident and to work with the private sector in the UK to create jobs and improve economic growth.' Back in 2011, with the wounds still fresh from the worst financial collapse in a century, there were deafening howls of outrage and anger in UK political circles over the brash American's choice of words. Time though, is clearly a healer. Had Diamond waited 14 years, presumably the response in Westminster today would be a nod of agreement. Kier Starmer's government has embraced the City, seeing the Square Mile as a ticket to faster economic growth. It is not natural territory for Labour – but with a faltering economy, a febrile bond market to keep onside, and tight constraints on tax and spending, needs must. Earlier this month Rachel Reeves could have been channelling Diamond in her Mansion House address. The clean-up job after the crash had gone 'too far in seeking to eliminate risk', the chancellor said. Regulation was a 'boot on the neck of business' that needed lifting. The message certainly landed with the chief executive of Goldman Sachs, David Solomon, who met the chancellor in 11 Downing Street last week. 'I'm encouraged,' he told Sky. However, the head of the bank dubbed the Vampire Squid warned the government still needed to be careful on tax and regulation. Other senior bankers, including the head of Lloyds Banking Group, have followed suit. Almost two decades on from the collapse of Lehman Brothers and the multibillion-pound UK taxpayer bailouts, memories of the 2008 crash are wearing increasingly thin. The banks have regrouped, and scent a Labour government prepared to consider the period of remorse is now over. To some extent, the vibe shift is justified. Britain's biggest banks have built up significantly more capital to guard against financial shocks, have exited riskier lines of business, and City rulebooks stretching to thousands of pages are in place. Lawmakers elsewhere are considering if risk aversion has gone too far – including in the EU, after the Draghi report. Could years of nugatory growth post 2008 be linked to overregulation? The Treasury is willing to consider the connection. For years the priority was ending 'too big to fail'. Now safety limits are viewed as a millstone around the neck of the City golden goose, complicated further by Brexit trashing London's prized status as a world-beating financial centre. It is clear to see why there is appeal in boosting the City. Britain has serious comparative advantages; London has been a global trading hub for centuries, with the legacy of empire giving it the prime spot on the meridian and use of the English language and legal system worldwide. Top universities and a vibrant startup culture help further. Financial services contribute £200bn to the economy and 5% of all tax receipts, employing more than a million people – two-thirds of whom work outside the capital in big regional financial centres from Edinburgh to Leeds, Manchester and Belfast. It is no coincidence Reeves dubbed her big bang 2.0 plan as the 'Leeds Reforms' to make this point. Finance is more than just the City. The chancellor is right that a strong economy needs financing. The drying up of liquidity after the 2008 crash – when banks cut back on lending to focus on repairing their balance sheets – showed what happens when borrowing is harder for households and businesses. However, hosting an oversize financial centre with assets worth £27tn – 10 times the value of everything produced in the UK each year – has serious risks. Labour ought to know this better than most, having been on the hook in government the last time the music stopped. The Bank of England governor, Andrew Bailey, remembers – having led the central bank's recovery operations during the 2008 crisis. Lest we forget, he warned the Treasury committee last week: 'There isn't a trade-off between financial stability and growth. We've had that experience.' Sign up to Business Today Get set for the working day – we'll point you to all the business news and analysis you need every morning after newsletter promotion Back then, taxpayer guarantees worth more than £1tn were required to stop the banking collapse turning into a second Great Depression. Still, the damage was monumental: millions of businesses failed, unemployment hit 2.7 million, tens of thousands of homes were repossessed. Alongside the obvious financial stability risks for a small, open economy, the reinflation of the banking industry could also hurt the government's other priority sectors if handled poorly. Alongside finance in the government's industrial strategy there are seven other sectors: advanced manufacturing, clean energy, creative industries, defence, digital, life sciences, and professional services. All need access to growth capital, and so a strong banking sector makes sense on paper. In practice, however, there is a risk the banks use their newfound freedoms to pump more money into speculative or overseas activities. The lesson from history are not particularly encouraging. Before the 2008 crash, banks were heavily criticised for prioritising speculative activity over lending for the production of goods and services; contributing to the inflation of the biggest property market bubble in history. Mortgages still account for more than half of all UK bank lending, whereas outstanding credit to non-financial corporations – and for manufacturing in particular – is worth a pittance in comparison. Hosting mega banks servicing the needs of global investors and corporates brings valuable flows of capital into Britain, sustaining jobs and wealth creation. But there are two-sides to the coin: since the 1980s big bang Britain has suffered from a 'finance curse', or Dutch disease, as the banking sector exploded beyond a useful size for the rest of the domestic economy, crowding out other activity and stoking inequality. The danger of relying on banks to do the heavy lifting on economic growth is best summed up by the US financial sage Warren Buffett's observation : 'We were promised that a rising tide would lift all boats. [Instead] a rising tide has lifted all yachts.' For the chancellor, a City big bang is only advisable with enough checks and balances to ensure the same does not happen again. The period of remorse might be over. But 2008 should not be forgotten.
Daily Mail
6 days ago
- Business
- Daily Mail
Tax trauma for growth: Labour is squeezing the life out of Britain's flatlining economy, says ALEX BRUMMER
Trade deals are flooding through the White House pipeline, with US-Japan done and rising optimism on a European accord. In Britain, Keir Starmer will be reannouncing his deal with India. It should eventually be good for whisky and car exports, but hackles will be raised by national insurance-free short-term contracts for Indian staff in the UK. The biggest lacuna is the failure of Starmer to secure binding accords on better access for Britain's financial and professional services, the UK's most successful export. Despite Rachel Reeves' Mansion House musings of last week, the Square Mile is unhappy and concerned. Lloyds Bank boss Charlie Nunn warned against further taxes on the financial sector in the Budget. Lloyds' profit bonanza of £2billion in the second quarter of the year will have the Deputy Prime Minister Angela Rayner, who has proposed an additional banking levy, straining at the leash. The danger of further attacks on the City and wealth was highlighted by Goldman Sachs chairman David Solomon this week. All that stands between the UK's flatlining economy and recession is the services sector, which softened sharply in July. The S&P purchasing managers' index, among the most reliable forward indicators, sits at a two-month low at 51, barely above the tipping point into recession. The damage to confidence from a summer of speculation about taxation will be considerable. As S&P notes, employment numbers in July decreased at the fastest pace since February, still being driven by the employers' national insurance hike. It is a Labour myth that increasing taxes on firms, rather than individuals, protects workers. The Government has dug itself a big financial hole with trade union giveaways and big NHS and welfare spending. Taxing its way to fiscal stability can only hamper output. Missing in action There is a puzzling disconnect between Britain's overall economic performance and that of some of our better-run companies. The Prime Minister likes to rattle on about the UK becoming an AI champion with little recognition that in £72billion Relx, the UK's seventh-largest listed company, we already have a champion user. Relx is not helped very much by its well-remunerated chief executive Erik Engstrom who behaves like a hermit and has no public profile. The bosses of public companies, like it not, have a responsibility to explain themselves to all stakeholders. In the case of Engstrom, the best to be expected is boilerplate about success and incomprehensible language which possibly, given its lack of insight, is AI-generated. Among his latest gems is talk of 'leveraging customer understanding to combine leading content and data sets with AI and other technologies'. What that means is anyone's guess. What we do know is that revenues and underlying profit are accelerating and income from 'risk' – that means cyber protection – and legal data are the stars, and are up 9pc. It is terrific that Relx is doing so well and the FTSE 100 recognises that. Given Relx's expertise in deploying artificial intelligence and outperformance, any thoughts about relisting in New York should be extinguished immediately. Changing channels Carolyn McCall at ITV has one of the trickiest gigs in Britain. She runs a company at the heart of the UK's creative sector in a global industry dominated by behemoths such as Netflix and Sky owner Comcast. Under her, and in the face of some investors' scepticism about costs, ITV Studios has become a production powerhouse, supplying terrestrial rival the BBC as well as streaming services. Future growth is expected from Rivals season 2 for Disney, The Reluctant Traveler for Apple TV and Gomorrah for Sky. ITVX, which was greeted by shareholders with outright disdain, but broke even two years ahead of expectation, expects £760million of income next year and has concluded a partnership deal with Disney. No longer is ITV's future as dependent on often volatile linear, terrestrial TV advertising. Despite all of this and a 13.3 per cent rise yesterday to 87.8p, the shares still languish. Time for a reality check.
Daily Mail
21-07-2025
- Business
- Daily Mail
Footsie closes above 9,000 for first time as round-the-clock trading idea sparks fierce City debate
The FTSE 100 closed above 9,000 for the first time yesterday – as a report that the stock exchange could introduce round-the-clock trading sparked a fierce debate. The UK index climbed 20.87 points, or 0.2 per cent to end the session at 9012.99. It is up by more than 10 per cent for the year to date. The Footsie reached the milestone even as politicians and City grandees worry that it is losing its relevance as a global financial centre. Reforms over the past couple of years have so far failed to revive valuations enough to spare the exchange from being raided by foreign predators. Some think it should follow rival exchanges in New York, which are already planning to bring in 24-hour or extended trading hours – but opinion in the Square Mile is divided. Record close: The FTSE 100 climbed 21 points, or 0.2% to end the session at 9013. It is up by more than 10% for the year to date. The Financial Times reported that parent company London Stock Exchange Group (LSEG) was considering the move. Michael Healy, managing director of trading platform IG, said 24-hour trading would be 'a welcome and overdue step in the right direction' for the exchange. He said: 'If London wants to reclaim its place as a leading global financial centre, it must lead on this.' But Michael Brown at broker Pepperstone said it could have a 'negative impact' on liquidity with trading volumes spread over a longer period resulting in more volatility. He added that there was 'very little clamour for such a move'. LSEG declined to comment.
BBC News
17-07-2025
- Politics
- BBC News
Met Police to close half its front counters following budget
The Metropolitan Police plans to close half the front desks at its stations to save money, the BBC has move would reduce the number across London from 37 to 19, and break a pledge to have a counter staffed 24/7 in each of the capital's 32 boroughs. A Met Police spokesperson said the plan was subject to consultation and no changes would be made until later this year."Given the Met's budget shortfall and shrinking size, it is no longer sustainable to keep all front counters open," they said. The Met covers all parts of London apart from the Square Mile covered by the City of London Police chief Sir Mark Rowley last month took the unusual step of warning Prime Minister Sir Keir Starmer that police forces would face "stark choices" about which crimes to investigate if their budgets were about funding was such that Home Secretary Yvette Cooper took negotiations with Treasury to the wire, ending up as the last cabinet minister to agree her department's spending. Labour made manifesto commitments to halve violence against women and girls as well as knife crime. At the same time, the Met has been struggling with a widespread loss of trust in its officers, particularly among women, following the murder of Sarah Everard by a serving police were further revelations about entrenched misogyny and racism, leading to the force attempting to rebuild trust with Londoners with a two-year plan making fresh commitments on community policing, in its A New Met for London strategy.A key commitment was to have at least one 24/7 front counter in each of London's 32 boroughs to make it easier for people to report the BBC has seen leaked plans for the Met Police that show only eight counters will remain open 24/7, and there will also be reduced hours at 11 front counters, closing at 10pm weekdays and 7pm weekends.A Met Police spokesperson defended the plans, saying: "That's why we have taken the tough choice to pursue some closures and a reduction in hours – allowing us to focus resources relentlessly on tackling crime and putting more officers into neighbourhoods across London."The spokesperson added that 5% of crimes were reported at front counters in the last year, "with the vast majority of Londoners doing it over the phone, online, or in person with officers elsewhere".With nearly a million crimes (948,241) reported to the Met in 2024 excluding fraud according to the latest government figures, that adds up to just under 50,000 crimes (47,412) reported at existing front Home Office and the Mayor of London have been contacted for comment. Sign up for our Politics Essential newsletter to read top political analysis, gain insight from across the UK and stay up to speed with the big moments. It'll be delivered straight to your inbox every weekday.
Telegraph
15-07-2025
- Business
- Telegraph
Red tape is ‘boot on the neck of businesses', says Reeves
Red tape is a 'boot on the neck of businesses' and risks undermining the UK's dash for growth, Rachel Reeves will say. In a major City speech, the Chancellor will urge Britain's regulators to ditch their 'excessive caution' and rewrite rules for banks and building societies to help more people on to the housing ladder and deliver better returns for savers. On Tuesday, Ms Reeves unveiled the biggest shake-up of financial services regulation in a decade, axing dozens of rules to boost the competitiveness of banks and insurers across the Square Mile. She is set to address City leaders and financial watchdogs at London's Mansion House on Tuesday night alongside Andrew Bailey, the Bank of England Governor, to lay out her plans to boost Britain's financial services sector. 'In too many areas, regulation still acts as a boot on the neck of businesses choking off the enterprise and innovation that is the lifeblood of growth,' she will say. 'Regulators in other sectors must take up the call I make this evening not to bend to the temptation of excessive caution but to boldly regulate for growth in the service of prosperity across our country.' Ms Reeves said slashing red tape would create a 'ripple effect' across the economy 'putting pounds in the pockets of working people'. As part of the offensive, the Treasury has unveiled a string of City reforms targeting consumers, banks, insurers and international investors in an attempt to revive Britain's sluggish economy. The measures, called the Leeds Reforms, will rewrite mortgage rules to make it easier for people to borrow up to 4.5 times their income when buying a house, as well as making it easier to remortgage. Banks will also be allowed to start pitching stocks and bonds to ordinary investors through a new regime known as 'targeted support', having been banned from doing so in the aftermath of the financial crisis. Major financial institutions such as Barclays and NatWest are also backing an advertising campaign with echoes of the 'Tell Sid' British Gas scheme in the 1980s to urge people to buy shares. Earlier this year Ms Reeves wrote to the Financial Conduct Authority (FCA), the Prudential Regulation Authority (PRA) and the Competition and Markets Authority (CMA) along with a number of other watchdogs asking them for a list of five things to boost growth. In a sign of her intent, the Chancellor effectively removed Marcus Bokkerink – the chairman of the CMA – after losing faith in his leadership.
