A deep sense of deja vu eclipsed the City of London when its Lord Mayor called recently for the creation of a new council to lead a reform of Britain's flagging financial services sector.
For many, the proposal served as a reminder of the scant progress made by a slew of task forces, committees and bodies all conceived to bolster the City’s fortunes after losing access to the European Union, the world’s largest and most lucrative single market, over three years ago.
But the prospect of yet another industry-government alliance to push reforms of the sector has sparked concern – and frustration – that lobbying across the City is simply too fragmented to succeed.
Ensuring London's banks, insurers and fund firms remain money spinners for the public purse has preoccupied the industry's brightest minds since the U.K. voted to quit the European Union in 2016.
As many as 30 public consultations have taken place in the last two years. But the reform agenda remains largely unfulfilled, costing the sector thousands of jobs that have steadily migrated elsewhere and untold sums in tax revenues now booked in rival hubs in Europe, Asia and the United States.
"We are certainly running the risk of reaching peak consultation. It is absolutely the time for action over words," Alasdair Haynes, CEO of Aquis Exchange, a share trading platform, and chair of financial industry body TheCityUK's Business Council, told Reuters.
Britain's regulators have tweaked EU-designed rules to improve the City's global competitiveness, including listing rules and what insurers can invest in, and how to support fast-growing firms' access to sustainable capital.
There have been further reform pledges from Treasury chief Jeremy Hunt in his pensions-focused Mansion House speech in July that followed a bumper package of proposed changes in his so-called Edinburgh Reforms in December 2022.
But trade bodies, initiatives and committees are struggling to get government and regulators to speed up and deepen the reform process, with just one major law – empowering U.K. regulators to craft policy to stoke competition – so far.
The main problem for trade bodies is the vast scope of Britain's financial services industry, with each sub-sector and TheCityUK presenting their own reform priorities and ideas, often overlapping.
Cue Lord Mayor Nicholas Lyons, ceremonial leader of the City of London, called on Sept. 7 for a council to knit together the vested interests and improve the competitiveness of the whole sector.
This council of industry, finance ministry and regulators would focus on pushing through reform to stem the leaching of top stock listings like Arm Holdings and derivatives trading to New York and share trading to Amsterdam.
"TheCityUK is the convening of all of the players in the City with the regulators joining in, but it's partly a talking shop, partly a body to make recommendations to government," he said.
"We need to have government and private sector and regulators sitting together, taking collective responsibility for monitoring the delivery of this strategy."
TheCityUK said it backs the mayor's proposal after having suggested a similar collaboration between the government and the industry in 2017.
In the meantime, top financial sector executives running global teams of bankers and traders are increasingly bewildered by Britain's inability to make faster progress on a matter of such economic significance.
According to TheCityUK, financial and related professional services contributed 254 billion pounds ($315 billion) to the U.K. economy in 2021 and employed almost 2.5 million people.
Some senior financial industry sources say politics may hamper the City's reform agenda even further, with a general election expected next year.
Parliament is also likely to refocus on issues with a greater chance of capturing positive headlines that sway a fickle electorate, the sources said, with lawmakers seen likely to avoid backing policies seen as enriching affluent bankers while inflation erodes average household wealth.
So far, Labour has indicated no shake-up for the City, which it calls "perhaps Britain's greatest asset," but a new government usually means some policy unpredictability.
"There is ... awareness on Wall St that the Conservative government, already low on political capital, is running out of time to enact anything that will make the UK financial sector more competitive,” Samuel Gregg, a fellow in Political Economy at the American Institute for Economic Research, told Reuters.
Meanwhile, in Europe, several countries are moving to exploit London's woes.
On Monday, Germany's Investment Funds Association renewed calls for a move of derivatives clearing to the EU to reduce the dependence on "third countries," though any substantial relocation of clearing away from the U.K. may take years.
France's success in attracting banks and fintech firms is boosting its balance of payments, with France-based financial services companies' transactions with the rest of the world setting a record 10.4 billion euros in 2022, double the figure in 2016, the central bank said in July.
"There are a number of major financial and fintech firms taking a wait-and-see approach to the U.K. right now," Richard Gardner, CEO of global technology firm Modulus, told Reuters.
"One of the issues with London's Big Bang overhaul is that there are increasingly more voices from differing stakeholders, making it more difficult to ascertain what the vision truly is," he said.
