Economic Secretary on consumer confidence and empowerment as a driver for growth
Harriett Baldwin's speech at TheCityUK's annual conference on 'putting customers at the heart of the growth agenda'.
Thank you, Chris (Cummings), for that introduction. It’s great to be here in this fantastic building.
One of the real charms about the City of London is how it combines the old and the new.
As well as cutting-edge skyscrapers, we have Roman city walls, medieval guildhalls, Christopher Wren churches, 18th century coffee houses and grand Victorian office blocks.
All of this reminds us, on a daily basis, that this part of London has 2,000 years’ worth of history as a hugely successful global trading city.
That history is reflected in this city’s unrivalled expertise in a number of key areas in international finance.
Whether that’s in international bonds – London-based firms accounting for 70% of Eurobond trading – project finance, or our continued world-leading position in over-the-counter derivatives trading.
But though my title is “City Minister”, I know that UK financial services stretch far beyond this square mile.
Indeed, two thirds of the 2 million jobs we have in financial services and complementary professional services are outside London.
This is a sector that has an enormous amount to offer the United Kingdom – and we will stand by you and help you go from strength to strength.
Today, I would like to share my vision for how the financial services sector here in the UK should continue developing.
You should continue to be strong and stable, playing a leading role in securing our economic recovery.
You should deliver for the customer, and help working people achieve their aspirations at every stage of their lives.
You should continue to be internationally competitive, and keep this country’s position as one of the best places in the world to do financial services.
And you will also need to be trusted: I think we all want to move on from the mistakes of the past and see confidence in the sector restored.
These four objectives are all linked. You cannot have one without the others.
But if we can make good progress on all four fronts, then I believe we could have a virtuous circle of success.
When your customers feel that you, as a business, have delivered for them, they are much more inclined to trust you.
When investors feel that a company has a solid bedrock of customer trust, it makes that company palpably more attractive.
When a sector is visibly successful, it draws in people and businesses from all over the world.
And when you increase your workforce and your level of activity, you are actively contributing to economic growth at a national level.
So the title of this conference – “Putting customers at the heart of the growth agenda” – chimes very closely with my ambition for the sector, because it makes clear that there is a strong link between how the customer feels, and the overall performance of the sector.
Financial services has a dual role in terms of generating economic growth.
As a high-performing sector in itself, it of course generates jobs and pays taxes. In fact, it contributes almost a sixth of the total UK economic output and 12 per cent of total UK tax receipts.
But it also provides finance, expertise and advice to millions of other individuals and companies.
That is an umbrella for a very broad range of activities – ranging in scale from helping someone save up for a new washing machine, to supporting global businesses through the creation of deep and liquid markets.
No matter the size or the prominence of your customers, they have a lot in common. They want to fulfil their ambitions; they want to make the right financial decisions; and they expect a decent, professional service at all times.
I see a key task of central government as helping you fill that role – because we, too, are committed to helping people achieve their aspirations at every stage of their lives.
And though getting more out of your bank is a relatively small part of a very large picture, it is hugely important.
Over the past five years, we have been particularly focused on driving more competition in banking.
More competition means that banks are more incentivised to offer their customers the best possible products and services.
And it means more engaged consumers, demanding a better deal.
The government has an ambitious programme of reforms to boost competition in banking.
We’ve been knocking down the barriers to entry for retail banking, helping challenger banks enter the market – or what economists like to call “disruptive innovators”. Looking ahead, the pipeline for more potential banks is promising: around ten are currently going through the regulators’ pre-application stage.
And we’re continuing to support the credit union movement, to make financial services more accessible.
We’re empowering customers to see which bank is best for them – and, where they see a better proposition, to switch provider simply, quickly and reliably.
We’ve been doing that through helping deliver “midata” in banking, and the 7-day Current Account Switch Service.
At the last budget, we also set out a commitment to deliver an open standard for Application Programming Interfaces, or APIs, in UK banking.
This will allow customers to access and make use of their bank data more easily – including benefitting from the range of value-added services which tech companies are already providing.
So customers could, for instance, instantly and clearly compare how much money they spend on travel or food across their accounts, work out ways to save money, and modify their spending to suit their budgets.
It’s simply a way of encouraging sensible behaviour by making it a much easier option.
We have also worked hard to open up access to credit data, and requiring banks to refer businesses they reject for loans to other, willing lenders – which has helped businesses access finance much more easily.
More still can be done – that’s evident from the Competition and Market Authority’s decision to investigate competition in personal current account and SME banking markets.
But the direction of travel has been set. Our aim is to see competition in banking working much more rigorously, so that customers are more able and more incentivised to get the best deal they can.
Competition is not only great because it gives the customer more choice. It also drives innovation.
You have to deliver what the customer actually wants, so that is an enormous spur to innovation – which is one of the fastest routes to growth.
In the UK we are really good at innovation. Just look at our alternative finance market, including peer-to-peer lending and crowdfunding lending, which grew by 168% in 2014.
Or look at our financial technology sector.
Over the past twenty years new technology has revolutionised the way we deal with money day to day.
Processes such as person to person payments can now literally be done at the touch of a button. You don’t even have to visit a bank to pay in a cheque. These changes have been transformational. They have made daily transactions much more efficient. And I’ve been delighted to see banks embrace new technology.
As well as making life much more convenient for the customer, fintech has also been a major driver of economic growth.
Our fintech sector attracted over £340 million in investments during 2014 – not only a record number, but one representing more than half of all Fintech investment in Europe. Fintech firms have created jobs, grown the economy, and made this country famous worldwide as a centre of expertise.
We will do whatever we can to help make the UK the global capital of fintech.
We’ve set up a Payment Systems Regulator to foster innovation; we’ve legislated to allow innovations such as digital cheque payments; we delivered an open API standard; and we’re working to become an attractive regulatory environment for legitimate digital currency companies.
As a government, we’re backing fintech all the way. Because we are firm believers that what’s good for the customer is good for the industry – and good for the country too.
So we have competition and innovation as key drivers of growth for the sector. I would like to talk about two more: international competitiveness, and productivity.
Together, they can help us not only maintain but consolidate this country’s position as the premier global financial hub.
We have enormous strengths: a stable legal system, a transparent business environment, a talented and dynamic workforce, and a large variety of extremely strong businesses providing complementary services. And it is also rather helpful that we have a time zone that sits between the US and Asia too!
That’s helped make us the most international banking centre in the world, hosting over 240 foreign banks and almost a fifth of global banking activity. We have the second largest pension industry worldwide; the third largest insurance market; the world’s most international stock market and 41% of all foreign exchange turnover.
But in a world where our competitors are only too eager to get as much business as they can from us, we need to be at least one step ahead the entire time.
To help us do that, we created the Financial Services, Trade and Investment Board, in charge of attracting inward investment, promoting external trade and knocking barriers down.
We’ve had major successes – whether that’s helping internationalise the renminbi, developing Islamic finance in the UK, or streamlining the regime for investment management.
And we are ambitious for the future. We want to further deepen our strong collaborative relationship with India – now the world’s fastest-growing economy according to the IMF.
We will continue work on ensuring we’re at the cutting edge of insurance-linked securities.
We’ll double down on the success of the renminbi, through a wider drive to attract Chinese investment into the UK And we will undertake an inaugural Economic and Financial Dialogue with Brazil, South America’s largest economy.
These efforts all build towards a financial sector that delivers more jobs and prosperity at home – and makes the UK the partner of choice for the fastest-growing economies of the future.
If we can keep up the momentum, I think the UK as a whole will reap the rewards.
Productivity is very closely linked to international competitiveness. Clearly, a more productive financial services sector makes you more internationally competitive – and vice versa too!
But the financial services sector also helps productive companies across the UK prosper and grow.
So we need the sector itself to be productive … and we need it to invest in productive companies.
In the very near future, we will be publishing a Productivity Plan, outlining how we can step Britain’s productivity up a gear.
I am afraid I am not going to pre-empt that plan yet!
But I think all of us agree that financial services can play a major role here.
Before the crisis, financial sector output and productivity grew rapidly, but at an unsustainable rate. The crash was therefore a major shock for the sector – and for your customers.
So if we are to ensure that the financial sector grows long-term, in a sustainable manner, and plays its proper role in supporting the UK economy…
…then we need to have financial stability and high standards of conduct in retail and wholesale markets.
This is why, after the crisis, it was such a priority for us to change the regulatory architecture, restore prudential supervision to the Bank of England and create a strong conduct regulator in the Financial Conduct Authority.
Over the next five years, we will finish the job of ensuring that the UK has the best regulated financial system in the world.
And we will continue promoting the development of vibrant, dynamic capital markets – helping both the sector and its customers.
There’s a few of us in the Commons who moved from the financial services sector to stand for Parliament.
I spent over 20 years managing pensions and investments for a wide range of customers.
We often joke among ourselves that we must be the only people in the Chamber who have switched to a more popular career!
But – more seriously – we also know how strong the financial services sector in the UK actually is, and how much it has to offer.
When you do well, the country does well.
Everyone benefits – including your customers, whom I am delighted to see you are putting at the heart of your plan for growth.
We have some exciting times ahead of us – and TheCityUK will continue to blend old and new and adapt as a global trading powerhouse.
I look forward to working very closely with you as we achieve the growth that comes from delivering for consumers and for the country.