Boris Johnson has called for a partnership between the government and Britain’s financial services sector in a post-Brexit, post-Covid economy, amid signs of improving relations between the two sides.
Links between the City and Number 10 have been strained for years, first in the aftermath of the global crash and later by the Brexit saga, but the Covid-19 crisis has helped to bring the two sides together.
On Monday, Downing Street said the government would “support innovation and the competitiveness of the UK financial services sector” as it adapts to life outside the single market.
Johnson, UK prime minister, was hosting a first virtual round table with more than a dozen chief executives of leading financial institutions. The meeting was also attended by Rishi Sunak, chancellor of the exchequer, and Andrew Bailey, Bank of England governor.
Among those invited were Ana Botin of Santander, Noel Quinn of HSBC, Anne Richards of Fidelity, Jes Staley of Barclays and Nigel Wilson of Legal & General.
The meeting was characterised by one industry participant as “much more collaborative” than past exchanges between government and the finance industry. It lasted 75 minutes, overrunning by a quarter of an hour. The prime minister arrived early, the participant said.
One person briefed on the meeting said: “One of the biggest themes was the need for growth equity, particularly for over-indebted SMEs, following the emergency lending of the Covid period.” Policymakers agreed to co-operate to tackle the issue.
The government has already become a shareholder in a toilet maker, a broadband provider and a company that helps make reusable cups as part of the Treasury’s foray into the venture-capital market through one of its coronavirus support schemes.
Meanwhile, one participant said: “The big macro theme was that by market capitalisation US banks are now 3.5 times bigger than UK and European banks, thanks in part to differences in regulation and government support. That’s not a good outcome.”
Asked how Johnson, Sunak and Bailey responded, the participant said they were clearly in “positive listening mode”, particularly on the issue of cutting the tax surcharge on banks.
Sunak announced in his Budget that the additional bank surcharge of 8 per cent on profits would be reviewed later this year. He acknowledged that plans to raise the standard rate of corporation tax to 25 per cent from 2023 would make taxation of UK banks “uncompetitive”.
Banks at the meeting made much of the fact that they were part of the government’s “levelling up” agenda, with jobs being created in Birmingham and other regional towns and cities, while City of London roles remained largely stable.
Downing Street said after the meeting, the first of its kind, that Johnson discussed the role that could be played by financial services in boosting the recovery, including in backing long-term innovation and green growth.
“Underpinning the discussions was a united drive to help deliver on ambitious climate change targets as we transition to net zero by 2050,” Number 10 said.
One observer said that Sunak thanked the financial services leaders for their support for the economy during the Covid crisis.
“He said he was a passionate believer in the industry and saw it as a crown jewel in the economy,” the observer said. “He said he was committed to keeping the UK competitive and dynamic in this field.”