Financial Services: UK Economy

Tulip Siddiq Excerpts

Thursday 9th December 2021 Commons Chamber

[Tulip Siddiq (Hampstead and Kilburn) (Lab)]

I am very grateful to the hon. Member for South Cambridgeshire (Anthony Browne), the hon. and learned Member for Edinburgh South West (Joanna Cherry), who is not in her place, and my hon. Friend the Member for Wallasey (Dame Angela Eagle) for securing this very important debate. Not for the first time, I agree with the hon. Member for Bromley and Chislehurst (Sir Robert Neill) that this has been a very valuable debate, and I hope that it gets the exposure that he mentioned.

Labour wholeheartedly agrees that our financial services are central to the British economy. Our financial services sector is a major driver of our country’s growth. It contributed an incredible £132 billion to the economy in 2019. Financial services are also the UK’s most successful export and have been for decades, worth £60 billion in 2019 alone.

The contribution of the sector will be vital to the UK’s future prosperity. As the OECD recently warned, the UK’s economic recovery is at risk. Earlier this week, the CBI downgraded growth forecasts to 5% as we are surrounded by inflation and supply shortages, with the CBI director general warning that businesses will face

“a cliff edge in 2023.”

Supporting the financial sector to thrive will be fundamental to our economic growth after covid-19 and to delivering the higher growth, jobs and tax receipts that we need to fund public services. That is why we want the Government to do more to support the sector to retain its competitiveness on the world stage. My hon. Friend the Member for Wallasey spoke about how regulatory stability is the foundation for success and innovation in the financial sector. I agree wholeheartedly with that point, which has been made a few times by Members across the Chamber.

We know that the most serious issue threatening stability for financial services today is the post-Brexit regulatory environment. In government, Labour would focus on making Brexit work for the City as well as for the country. I think everyone in this Chamber will be pleased to hear that Labour does not want a rematch—we not do want to reopen negotiations, before any headlines start to fly—but being outside the EU does not change the fact that for many firms in finance it remains an important market. In 2019, an enormous 40% of UK financial exports went to the EU.

We have heard a lot about getting Brexit done, but what we want from the Government now is a proper plan for the aftermath. Regulatory equivalence for the finance sector should have been a priority in talks with the EU, but the Government have failed to achieve that. We feel that the sector is in a state of uncertainty now.

In my role, which I took on recently, I listen to the concerns of our world-class financial and professional service businesses. That is why Labour would seek regulatory equivalence with the EU for financial services and an agreement with the EU on mutual recognition of professional qualifications and conformity assessments across the entire sector. A Labour Government will build on the deal in the national interest through the mutual recognition of professional qualifications for our service sectors. We cannot risk our financial firms losing their competitive edge in the European market.

Labour would protect the UK’s status as one of the most important global financial centres as we shape a new future outside the EU. To achieve that, as Members across the Chamber have recognised, the sector must be ready for the challenges of the future. That will require the Government to provide the space and regulatory landscape for financial services to innovate. That is why Labour wholeheartedly welcomes developments in FinTech, which many hon. Members have mentioned and which will allow companies to experiment with new finance models and create high-skilled jobs for the future across the UK. Deloitte estimates that, with the right support, FinTech could add £3 billion to the economy and create more than 50,000 new high-skilled jobs.

The 21st century requires the Government to play an active role in ensuring that the UK can take advantage of new technologies. Labour would award far more public contracts to British businesses, such as a young entrepreneur who has established a FinTech start-up in Newcastle, as opposed to handing them to overseas firms.

I agree with the hon. Member for South Cambridgeshire that the biggest challenge facing the UK is the climate crisis and the transition to a green economy. I also agree with him that the Treasury Committee needs proper support, because it is the most important Committee in the House. Labour has committed to £28 billion a year of capital investment every year until 2030 to support the green transition.

We believe that the financial sector has a vital role to play in attracting green investment. Many innovative companies are already recognising their wider responsibilities. For example, Lloyds, which has been mentioned, is providing discounted financial support for investment in dairy farms to reduce their use of energy. This is a welcome step, but the transformation of our economy will require radical action from the Government. We want to see more ambition in the Government’s announcements on green bonds. Labour would seek to make the UK the green finance capital of the world. That is why we have called on financial institutions and FTSE 100 companies to produce credible climate transition plans by 2023.

The financial sector should serve the people of this country wherever they happen to live—a point that has been echoed by Members across the Chamber. My hon. Friend the Member for Wallasey and the hon. Member for Wimbledon (Stephen Hammond) both spoke about the importance of recognising the contribution that UK financial services already make beyond the City of London. The sector in Leeds, Birmingham, Edinburgh and everywhere else provides a significant contribution to our national economy.

However, in the past 10 years, regional inequalities have widened. Growth in the financial sector has not been felt equally across the country. In 2019, the financial services sector contributed more than half a million jobs in London and the south-east. That should be celebrated, but there were only 43,000 jobs in the sector in the east midlands and 24,000 in the north-east.

We have heard a great deal about levelling up in recent months, and I think that we can agree with much that has been said about it today. The hon. Member for Wimbledon talked about the UK being a centre of financial services. He also talked about a powerhouse of financial services, and that is what we want to see in this country. The hon. Member for Hitchin and Harpenden (Bim Afolami), who has left the Chamber, talked about levelling up people, and Labour shares that ambition.

Our recovery is fragile following the shocks of the pandemic, and our economy is much in need of a boost after a decade of low growth. The financial sector will be critical in delivering the prosperity that we need. I therefore welcome this important debate about the need for the Government to support financial services to enable them to retain their competitiveness on the world stage. I agreed with the hon. Member for Wimbledon when he said that it should not be just him and me standing up and speaking about this important topic; Members throughout the House should be standing up and speaking about it.

Let me end by asking the Minister a couple of questions. Does he accept that his Government should find an agreement on regulatory equivalence with the EU for financial services, and does he agree that UK financial services should be at the heart of all our future trade negotiations to help build a positive future for this crucial sector?