The reforms Kemi Badenoch announces today will see the end of ringfencing and the end of an unfair international disadvantage imposed through capital requirements set by regulators. This is only the start. We will go further, says Andrew Griffith

If, like me, you left university to work in the city in the 1990s, you will know what it felt like to work at the world’s greatest intersection of capital and private enterprise.  The place where exciting ideas and top talent met the financial backing that made Britain one of the richest countries in the world. If you knew the city then, you would know how much it has changed, and just how much it has been held back.

What we, the Conservatives under Kemi Badenoch’s leadership have announced today, while very technical in parts, is the foundation of a fight back. Just as I inherited a financial sector built over centuries, in coffee shops that became Lloyds and the London Stock Exchange, and renewed by Mrs Thatcher’s big bang, we will create a city worthy of the next generation.

As we set out today, Britain’s financial services industry is in trouble. Despite its vitality, storied history, and deep strengths, we are losing ground to rivals in the US, Europe, and Asia. Where once London was the premiere European capital for IPOs, others have fast been catching up. And as productivity has dropped, it is no coincidence that the financial services rulebook has only grown while gold-plated and vague regulations have choked success.

Much of this stems from the hyperventilating approach to risk that has taken hold since the financial crisis. No one wants to see a repeat of Northern Rock, but many of the reforms put in place would never have achieved that. Instead, they placed onerous limits not only on the type of speculation that caused this global crash, but on the ability of banks to lend to legitimate businesses, insurance to invest, and the economy to grow as a result of a healthy provision of credit and capital.

Regulators went awry while politicians in Westminster practiced panic over policy.  The same has been true of the evolution of the regulatory rulebook since, which has focused on doing a little of everything (net zero, EDI, ESG) while doing nothing well.  

In the 1980s, the city had one person working in regulation for every 11,000 working in the financial sector; today it has one for every 75. I remember the day I discovered there were 5,400 people working in the FCA alone, few with a background as risk taking practitioners. Banks receive thousands of pieces of correspondence from various regulators, taking part in hundreds of meetings every year. The result has been a £33.9bn annual cost to the sector: £33.9bn not being spent on providing capital, improving returns, and consequentially growing the economy.

I remember the days when a 40-page prospectus was considered long. Before some of the reforms enacted under the last government it was not uncommon for them to run to 400. I remember the days before European five-letter acronyms like MIFID or PRIPS ruled the roost in a market that far predates most modern European states – and before they did it outcompeted them too.

Untangling the web

I know that my party has not been innocent of this, I learned this in the year or so that I spent as City Minister, trying to untangle the web past governments had woven. While we had initial success with the Financial Services and Markets Act 2023, the Edinburgh Reforms, and the Mansion House Compact, these should have come earlier, and in many cases have yet to be delivered by our successors.

A future Conservative government, which has the benefit of people who worked in the city, recognise its role as an economic powerhouse, and in my case came to Parliament late, after a career in the private sector, will not hold back. Our commitment to the financial sector is resolute, and we will bring to it the same detail and clear policy plans (before entering government), that we are bringing to other areas of the economy.

The reforms Kemi Badenoch announces today will see the end of ringfencing and the end of an unfair international disadvantage imposed through capital requirements set by regulators. This is only the start. We will go further.  

We will review every tax that damages competitiveness, deters investment or drives capital elsewhere, including Corporation Tax, Stamp Duty Reserve Tax and Capital Gains Tax

We will lower the burden of tax on business. We will review every tax that damages competitiveness, deters investment or drives capital elsewhere, including Corporation Tax, Stamp Duty Reserve Tax and Capital Gains Tax. But we will only make commitments we can fund. We are not in the business of making promises we can’t deliver.

I know first hand the difference a well-functioning, empowered financial sector can make for everyone in Britain. Our definition of the City goes well beyond the Square Miles, it extends through Edinburgh, Manchester, Belfast, and beyond. It encompasses the mortgage that unlocks the dream of a home for a first-time buyer in Leeds, the credit-line that lets a manufacturer in Teesside make payroll in a crisis, and the listing of an exciting company in Cambridge destined to become Britain’s first trillion-pound enterprise.

The Conservative party we are building will not accept decline, deindustrialisation, or a city derisked to the doldrums. We will make Britain the global centre of finance it was and deserves to be again.

Andrew Griffith is shadow business secretary