UK supports the development of Sri Lankan Financial Services industry
Speech made by The Lord Mayor of London at a CEO Breakfast held in Colombo on 19 May, 2015.
The Lord Mayor of London, the Rt Hon Alderman Alan Yarrow made an official visit to Sri Lanka from 17-19 May 2015. He made the following speech at a CEO Breakfast organised by the Institute of Chartered Accountants Sri Lanka (ICASL) and the Chartered Institute of Securities and Investments (CISI) on 19 May, 2015 in Colombo.
I am delighted to be with you today in this beautiful country! And I am delighted to be at this breakfast. Both as Lord Mayor of London – an Ambassador for ALL UK financial, professional and business services – and as Chairman of the Chartered Institute of Securities and Investment – the CISI.
So thank you to all those who have orchestrated this important event. Not least:
- His Excellency Mr James Dauris, British High Commissioner to Sri Lanka;
- Mr Arjuna Herath, President of the Institute of Chartered Accountants of Sri Lanka;
- Mr Nihal Fonseka, President of the National Advisory Committee of the Chartered Institute for Securities & Investments – Sri Lanka;
Thank you for inviting me to address this esteemed audience.
To kick things off – let me set out some key facts about the City of London and the UK. Six ‘vital statistics’ as a truly global financial centre:
- The UK is the world’s leading exporter of financial and professional services with a trade surplus of £71 billion in 2013.
- The UK is the largest source of insurance funds and pensions in Europe.
- Investment in financial technology is growing faster in the UK and Ireland, than anywhere else in the world.
- The UK accounted for 41% of global foreign exchange trading in April 2013 – well ahead of the USA, Japan and Singapore.
- The UK is the leading Western country for Islamic finance, with US $19 billion of reported assets.
- Almost two-thirds of all RMB payments outside China and Hong Kong now take place in London and 28% of all international RMB payments are made in the UK – the most outside Hong Kong and mainland China.
In essence – the City of London has an unrivalled concentration of capital and capabilities, as well as a regulatory system that is effective, fair and principled. And this means that more overseas financial institutions and investors choose to do business in, and with, the UK than any other country.
The importance of London is at the heart of the UK’s international position – but there are cities across the UK which are important financial centres in their own right. They all feed into and are fed by the City of London. For example:
- In Scotland: Edinburgh, Glasgow and Aberdeen;
- In England: Birmingham, Bristol, Leeds, Liverpool, Manchester and Norwich.
- In Wales: Cardiff
- And in Northern Ireland: Belfast
Over 2 million people work in the financial services sector in the UK and only 400,000 of them work in London. The rest all work in the other financial hubs in the UK.
According to independent corporate finance adviser IMAS, there are just under 28,000 regulated companies in the UK financial services industry. This number comprises investment firms, lending businesses, general insurance companies and associated financial support services providers.
There are 976 general insurance companies in the UK. And the industry boasts a number of compelling reasons for overseas firms to invest – including the UK’s expertise and skill base. We’ve also got a robust legal and regulatory framework and the law of contract is critical; we’ve got liquid capital markets, transparency in financial reporting and geographic position i.e. the time clock and language.
As a result, the UK Insurance Industry continues to attract investment from a broad range of overseas investors as well as from local UK-based businesses. It is the largest in Europe and the third-largest in the world.
TheCityUK (the independent membership body promoting the UK financial services industry), reports that London is the only place in the world where all 20 of the world’s largest insurers and reinsurers are active. So I think we can all agree that the UK has a strong financial services sector and a strong offer to any company thinking of setting up a presence there!
And here are some other vital stats:
Financial and related professional services contributed £174 billion to the UK economy in 2012 and represents 12.6% of UK economic output;
It contributed £65 billion in tax receipts in 2012/13, which is 12% of total UK tax receipts.
Over 2 million people work across the UK in financial and related professional services and two-thirds are employed outside London.
Almost 320,000 of the 2 million are employed in the insurance sector.
London vies with New York for the status of the world’s leading financial centre, with the Global Financial Centres Index barely able to separate the two cities in its assessment of their competitive strengths. Hong Kong and Singapore are also competing strongly – two examples of financial centres that have based themselves on UK practices and models. And working with other financial centres has helped develop the international networks of UK-based firms, allowing them to expand their international business.
In return, the UK has provided access to its markets and expertise for overseas companies, and has acted as a template for many developing centres.
TheCityUK reports that financial and related professional services generated a record trade surplus of £71billion in 2013. Making the UK the world’s leading exporter of these services. This £71 billion was more than twice that of the next largest trade surplus recorded by any other country, including the US and Luxembourg.
Financial services also account for around a third of all foreign direct investment into the UK, more than any other sector.
TheCityUK highlights five factors that underpin London’s status as the premier international financial centre.
- A central geographical location between the US and Asian time zones – that allows London to work virtually around the clock.
- Ease of access to markets, combined with a tradition of welcoming foreign firms.
- The availability of high-quality professional and support services, substantial, modern office accommodation and an efficient telecommunications infrastructure.
- A concentration of financial institutions; London has more foreign banks than any other centre.
- A consistent, politically neutral legal system that is widely used and understood globally, as well as resilience in its democratic structure.
I’ve certainly hit you with a lot of facts and figures this morning! But underpinning them all are the pillars of a successful financial services sector: professionalism and integrity.
As Chairman of CISI, I am proud that CISI is leading the way in championing integrity as a key component of professionalism, through an effective combination of knowledge, skills and behaviour. In each of these areas, the CISI has developed products and services where the highest standards of integrity are embedded and regularly tested.
The events of the past few years provide a reminder of the importance of firms acting and demonstrating their honesty, openness, transparency and fairness in all their business activities.
Poor actions by single individuals can result in great costs to firms, both financially and through loss of reputation. Fostering an environment of trust, integrity and professionalism leads to greater confidence – ultimately strengthening a firm’s reputation in the market. To use a cliché about trust: it arrives on foot and leaves in a Ferrari.
The CISI is committed to raising standards in global financial services, working with the relevant regulator to issue a mandate to the market – a mandate which:
- raises the competency requirements for professionals and introducing international standards;
- requires individuals to maintain their knowledge, skills and competence;
- requires individuals to abide by a Code of Conduct; and
- provides clarity for all market participants.
In the UK, the FCA recently raised the minimum level of competency for anyone providing any form of retail advice.
This resulted in raising standards for professional advisors and providing greater protection for consumers. The result was that the minimum standard was increased by one level on the qualification framework and, in addition, requiring that individuals demonstrate they have undertaken a minimum of 35 hours of self-development each year.
Sri Lankan companies also play a pivotal and unseen role to the development of the UK Financial Services. Take for example MillenniumIT, which provides the software on which the London Stock Exchange operates on; software also used by HSBC in Sri Lanka, processing data for clients in the UK.
We all have a role to play in building the future of our global industry – and we in the CISI and the UK want to support the development of the Sri Lankan Financial Services Industry.
Thank you for taking the time to listen to me today, and I will answer any questions in the ensuing panel discussion.