[...] The benefits of this project [CMU] will be immense and will help harmonise European capital markets. At the moment, they are both underdeveloped and fragmented because rarely do businesses looking for capital go outside their own country.
It also presents a significant opportunity for the UK, as more than half of all capital markets activity in the EU is through Britain. But when we get Capital Markets Union in place, it will help economies across the EU, not just the City of London.
The drive comes as Europe remains gripped by an investment crunch, with businesses, especially small and medium-sized ones, struggling to find the funding they need to grow. The Commission’s own research suggests that, while most SMEs get their funding from banks, a third fail to get the full amount they were looking for. Our growing startups, like those up the road in Tech City and the 13,000 SMEs in the Square Mile, will be some of the beneficiaries of this project.
We do, however, need to be realistic about what can be achieved. A certain amount of fragmentation will always persist given the very nature of the European Union, with its 28 member states and 23 official languages.
A Capital Markets Union can facilitate growth but will have a limited effect, given the current extraordinary monetary conditions, without fixing the wider macroeconomic situation in many European countries.
Nevertheless, I firmly believe that, with Europe focusing on jobs and growth, this will enhance the stability and prosperity of the European economy. With the most developed capital markets in Europe, the UK has a key role to play in building Capital Markets Union. But as I said last week, the countries that will most benefit are those with less developed capital markets.
The noises that we are constantly hearing from the Commission are positive to say the least. Hill said that it is reviewing two and a half times as much regulation as in previous years. There is a commitment towards the right regulation, not just light regulation, and the Commission’s €315bn investment plan was up and running less than a year after it took office. And at the very heart of this has been the emphasis on promoting jobs and growth.
With the Commission also running a call for evidence on the cumulative impact of financial legislation, specifically looking at overlapping reporting requirements or inconsistencies between the various laws, things are looking up. I would urge all financial services firms to have their say here by contributing their views. We need buy-in across Europe to make this work.