Lord Mayor, President Draghi, Mr. President, Your Excellencies, Sheriff, Ladies and Gentlemen
It is a real privilege to be invited to speak this evening on a matter of great importance to the City of London and to all of us in the United Kingdom – the future of Europe in the global economy.
And it is a pleasure to follow the Lord Mayor. As we both travel around Europe promoting the City of London and the UK it is not uncommon for us to follow each other.
Lord Mayor, you were most recently in Lithuania – the latest of your highly effective visits to each Member State as they take on the EU Presidency. On your trip, which also took in Estonia, you saw the growing links between the UK’s financial services sector and the thriving IT sectors of those two countries. I hear that you were equally impressed by the local dark beers our Ambassadors introduced you to.
I am delighted to speak alongside Mario Draghi, back in London 10 months on from speaking at last summer’s Global Investment Conference at which he promised to do “whatever it takes” to protect the Euro, in what turned out to be a pivotal moment for the currency.
President’s Draghi’s presence is a powerful reminder of both the need for continuing close links between the ECB and the Bank of England, and the broader challenges we face in ensuring that the institutional relationship between the eurozone and the rest of the EU meets the needs, and protects the interests, of all of us.
The Open City
Lord Mayor, I can think of no more appropriate place than here, in the heart of the City of London, to consider the question of Europe’s future in the global economy.
The City of London has a long history of looking beyond Britain’s shores and being open and welcoming to those it finds there.
In the Museum of London they will tell you that it was the Roman Emperor Diocletian – born in the Roman province of Dalmatia on the eastern Adriatic coast – that made London our capital. He started London on the road to being the great global city it is today. He also founded the city of Split in Croatia and we welcome Croatian President Jospipovic here this evening. We will also welcome his country with open arms when they join the European Union in July.
The City, then, has a long and proud history of being open to Europe and serving Europe as it serves the UK.
The City and the Economy
I want the City to continue this tradition and to retain its position as Europe’s financial centre, a global financial centre.
I think we can take pride in that fact. It matters to the UK. The benefits of a strong and stable financial services sector are clear to here tonight, not least because the sector contributes about 10% of UK GDP. And I would underline that this is for the UK as a whole. We can too easily equate financial services with London. But Edinburgh is a market leader itself, and I was recently in Northern Ireland where 4,000 jobs rely on the sector.
But we should speak more compellingly about the pride that Europe as a whole should take in City. And about the contribution that it makes to all 27, soon 28, Member States. So I want to make that case tonight.
First, my starting point is that financial services make a daily and real contribution to what we tend to call the ‘real economy’. It frustrates me to hear talk of a choice between economies structured around virtuous industrial production and those living off the ill-gotten gains of financial speculation. This is a false choice and lazy analysis. And no-one working for Europe’s industrial powerhouses would believe it for a minute.
Look at the export and industrial driven success of Germany over recent years. Do Bayer think that their use of derivatives to hedge currency risks is speculative? No. They see it as a normal part of day to day business and they are right. The same goes for Siemens and other manufacturing champions and energy companies throughout our continent.
And it is not just the established giants that make use of financial services.
- Great Fridays. Thanks to credit that helped them expand this Manchester-based digital agency helping the UK’s and Europe’s largest companies to strengthen their online presence. Financial services supporting the ‘real economy’.
- Glasses Direct. Set up in 2004 it has, with help from venture capital funding to expand to become the UK’s biggest online seller of prescription glasses and Europe’s biggest online sunglasses retailer. Financial services supporting the ‘real economy’.
You know, as I do, that every hour of every day UK financial services firms help people across Europe to save for their retirement, to buy their house, to set up and grow their business including expanding into overseas markets, and to insure and hedge against risks of all kinds.
So let us speak up confidently about the interdependence of innovative, global manufacturing and innovative, and global financial services.
The City and Europe
Second, we need others around Europe to see as clearly as we do that the City of London is an asset for the whole of Europe, not just the UK. Because where they don’t it allows lawmakers to indulge in ‘banker bashing’ as if ill-thought-through or poorly designed regulations can be imposed on Europe’s financial services without any consequences for the real economy.
Around a quarter of the 160,000 people employed in London’s banks hold foreign passports, many of them EU citizens taking advantage of their EU rights to move in search of new opportunities. 125 companies from other EU Member States are listed on the London Stock Exchange. Banks from other EU Member States hold £1.4 trillion of assets in the UK, about 17% of our total bank assets.
Every day the City helps real businesses in the real economy right across Europe to provide vital services to citizens. The Lord Mayor saw this in the Baltic, but all around Europe there are businesses being set up and growing on the back of financing and expertise provided by the City of London.
- In Hungary, the UK-based home credit company Provident employs over 3,700 people making it one of the country’s biggest employers as well as providing loans in to the Hungarian economy.
- Insurer RSA is expanding rapidly in the Polish insurance market following its acquisition of Poland’s leading online insurance broker.
- In Greece, as the country rebuilds its economy, the UK is the biggest provider of banking and insurance services to the Greek shipping industry.
Third, we also need to remember the global context. What Europe needs is not new institutions or years of discussion about the intricacies of how decisions are taken in Brussels. What it needs is growth and to face a changing world in which wealth and business are global and where rewards flow to those that innovate.
The City of London has always been open to the world. So you do not need me to tell you that world beyond is changing with enormous shifts in wealth, power and influence as the economies of the South and East grow.
I look, for example, at the increasing role of sovereign wealth funds and their investments, at the rise of China, India and Latin America and at the rising productivity gap between Europe and the US. In that kind of world Europe needs to be open and to be confident about our ability to compete. But to do so we need to show exactly these qualities ourselves, and, in so doing, make Europe a magnet for investment from around the world.
We need to be Open. Outward looking. Innovative. Financial services are all of that things and are an essential part of Europe adapting to, and thriving in, the Twenty First Century.
So I want to leave you with that bigger picture. As David Cameron has often warned, Britain and Europe are in a global race and Europe needs fundamental reform if we are to keep up with the rest of the world. If we are to do that we need to make the most of our assets, not undermine them. The City of London, as I have made clear today is one of Britain’s – and Europe’s – greatest assets. It is in the interests not just of the City, not just of the United Kingdom, but of the 500 million citizens of the European Union that London continues to thrive.