05 June 2013

City of London/Boleat: The future of the European Financial Services market

Mark Boleat, Chairman of the City of London Policy and Resources Committee, said that the European financial services market was of crucial importance to the City of London, and to the UK more generally. He stressed the need for cooperation in Europe.

Single Market

Until recently there were few complaints in the British financial services industry about the single market, but two recent developments have raised real concerns about the direction in which Europe is heading.

The first is the cap on bankers’ bonuses. This is simply bad policy-making. There is no impact assessment and has been no meaningful consultation. The policy will not achieve its desired objectives, inasmuch as they can be determined. It will not lead to a reduction in bankers’ pay – the market is doing a pretty good job of doing this – and it will not reduce risk in the banking industry, because there will be a restructuring away from variable pay and towards fixed pay.

At the margin it will make the EU a less attractive place to do banking business. And the extra-territorial aspects of the tax are thoroughly undesirable. From the UK point of view this was a measure that if not aimed at the UK, will have a disproportionate effect on the UK

The proposed Financial Transaction Tax (FTT) is even worse. Since the most recent proposals were published, the evidence of the negative impacts of such a tax has been growing. The intended broad scope of the tax means that it would be impossible to shield the real economy from its effects.

That is a point that has been made here in Germany - both Bayer and Siemens have publicly criticized the FTT, as it will impose millions of Euros of additional costs and increase burdens on pension schemes.

British Membership of the EU

During this time key decisions will be taken on the future of Europe. Britain must not lose sight of the “day job”. It needs to be fully engaged in the development of policy at the European level, to help ensure that decisions taken are in the best interests of the whole of Europe, Britain included. This may not be as exciting or headline-grabbing as the debate on referenda, renegotiation, repatriation etc. but in the short term it is more important. Those decisions are capable of having a significant effect on the British economy, regardless of whether Britain is in or out of the EU.

And also during this time, businesses round the world will be taking location decisions – where to expand, where to contract, where to set up. At the margin, London’s position is weakened by the current debate on Britain’s membership, and it is the duty of all politicians in Britain to ensure that this never gets beyond “at the margin”.

So the clear message from the UK financial services industry is that Britain wants to be within the Single Market, and therefore within the EU, that Britain must be more engaged in seeking to shape the single market so that it is outward looking not protectionist, and that Europe must play its part by recognising that there is a global market and Europe itself must change to meet the challenge.

Full speech

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