TheCityUK Annual Dinner: Chancellor's speech
The Chancellor of the Exchequer, Philip Hammond's speech at TheCityUK's Annual Dinner.
John [McFarlane], thank you for inviting me here tonight鈥�
鈥nd thank you to the CityUK for hosting us at this wonderful venue鈥�
鈥he home of the Worshipful Company of Plaisterers.
Some of you may not be aware that The Plaisterers can be traced back as far as the twelfth century鈥�
鈥o when the first Mayor of London, Henry Fitz-Ailwin ordered that all cook-shops be plastered and limewashed for protection against fire鈥�
鈥he irony being that the first two halls the Company owned would later themselves be destroyed by fires.
Our first Mayor of London was such a success that he went on to be entrusted with raising the ransom funds after
Richard the Lionheart was captured on return from a crusade near Vienna鈥�
鈥ome 100,000 pounds of silver鈥�
鈥hich, to put in perspective, was 2-3 times the annual income of the Crown at the time鈥�
鈥鈥檇 be interested to hear whether the Treasury at the time considered this value for money.
Tonight, we celebrate our world leading financial and professional services industry in the UK.
The key phrase is 鈥渨orld leading鈥濃��
鈥nd I鈥檒l say a word or two about the government鈥檚 plan to keep it that way鈥�
鈥hrough our negotiations with the European Union and beyond鈥�
鈥nd then I鈥檒l let you get on with your dinner.
First, I鈥檇 like to thank John for that introduction鈥�
鈥nd for all the work of the CityUK in representing the best of Britain鈥檚 financial and professional services.
I鈥檇 particularly like to pick up on your articulation of the need to look beyond Brexit鈥�
鈥 absolutely agree that we should not take our historic positon as a global leader for granted鈥�
鈥nd nor should we take for granted the economic model that has brought us so much success over the years鈥�
鈥ne that has brought the UK back from the brink of the financial crisis鈥�
鈥elivered record employment levels鈥�
鈥�19 consecutive quarters of growth鈥�
鈥ur deficit down by three quarters鈥�
鈥nd national debt as a share of GDP finally about to begin to fall.
And when we hear the siren voices calling the young and impressionable to test out economic models that have actually been tried鈥�
鈥nd have failed鈥�
鈥ith such disastrous consequences before鈥�
鈥oth here and abroad鈥�
I believe it is incumbent on all of us鈥�
鈥n business and in government鈥�
鈥oudly to make the case, for a market economy, for sound money, and free trade鈥�
鈥hile recognising of course that the economy will be fundamentally changed by the new technologies鈥�
鈥hat offer both a new route to productivity enhancement鈥�
鈥s well as new challenges as a society.
For as I set out in my Budget a couple of weeks ago鈥�
鈥t is only by embracing the technology of the future that we can build an economy that is fit for the future.
And it is our future that I want to talk about tonight.
Because, yes, we face economic challenges鈥�
鈥ur productivity growth is far too low鈥�
Of course, our negotiations with the EU are in a critical phase鈥�
鈥nd getting the right deal鈥�
鈥nd an implementation period to allow us to adjust to it鈥�
鈥ill be vitally important in the short-term.
But the long-term future of Britain鈥檚 economy is about much more than these negotiations.
We are on the brink of a technological revolution鈥�
鈥nd this time, Britain is genuinely at the forefront of it鈥�
鈥nd if we are to deliver higher living standards for people up and down this country鈥�.
鈥e must prepare Britain so that it can embrace this future鈥�
鈥nd seize the opportunities that it brings.
And this is as important for our financial and professional services sector as for any other.
Not only because you represent 11% of our economy鈥�
鈥ne in 14 of all UK jobs (two-thirds of them outside of London)鈥�
鈥nd contribute over 拢80 billion of tax revenues鈥�
鈥which I am particularly happy about.]
But because this sector has been at the forefront of innovation and technological change for many centuries鈥�
鈥nd it is once again.
Our success, historically, has been based on being the most open and most dynamic financial sector in the world鈥�
鈥n the ability to continuously innovate and adapt as the world around us changes.
We did it in Elizabethan London when trade turned the City into the world鈥檚 biggest international banking bazaar鈥�
鈥e did it in the post-war period when the dollar became the pre-eminent global reserve currency, but London鈥檚 more dynamic approach allowed it to fight off competition from New York鈥�
鈥nd we鈥檙e doing it now 鈥� for example, in FinTech, a sector that barely existed a decade ago 鈥� that now employs 60,000 people right across the UK鈥�.
鈥nd received a record 拢2.1 billion investment in the first three quarters of this year.
And as The CityUK are quick to remind us鈥�
鈥t isn鈥檛 just about financial services鈥�
鈥t is about the whole ecosystem we have built here over decades鈥�
鈥ith the critical mass of banking, asset management, insurance, law, accountancy, consulting, and other vital business support services.
It is this government鈥檚 priority to achieve an outcome from our negotiations with the European Union that maintains effective, mutual access to European markets鈥�
鈥nd ensures the UK remains a global financial and professional services hub.
But I have no doubt, that whatever the outcome of the negotiations鈥�
鈥he UK has the history鈥�
鈥he advantages of our timezone, our language, and our legal system鈥�
鈥nd the talent, the capital markets, and the tech sector鈥�
鈥o remain the world鈥檚 leading financial centre.
Passporting did not create the City of London.
And when we look back in twenty years鈥�
鈥hat will define the UK鈥檚 success will be less how we handle Brexit鈥�
鈥han how we have grasped the opportunities, and embraced the challenges, of technological change.
The facts speak for themselves.
Since the referendum, professional services have grown three times as fast as the whole economy鈥�
鈥e鈥檝e already seen double the amount raised in London through IPOs this year as in the whole of 2016鈥�
鈥nd London has once again been named the world鈥檚 number one financial centre.
But we cannot and will not rest on our laurels.
We must act now to ensure that in the face of rapid global change鈥�
鈥he UK remains the number one place in the world to conduct financial and professional services business.
Our regulatory environment must continue to adapt鈥�
鈥t鈥檚 not just about making sure regulation doesn鈥檛 get in the way of business鈥�
鈥t鈥檚 about using the British skill for regulatory innovation as a comparative advantage.
That鈥檚 why we have given our regulators a mandate to ensure we have the world鈥檚 most accommodative regime for FinTech development鈥�
鈥rom the FCA鈥檚 鈥榬egulatory sandbox鈥欌��
鈥o the Bank of England鈥檚 鈥楩inTech Accelerator鈥�.
And we must reach out across the globe to build new relationships and unlock new markets鈥�
鈥s we have done by becoming the Western Hub for Renminbi trading鈥�
鈥nd striking four FinTech Bridge agreements, as well as working on a fifth with Australia which I hope we鈥檒l sign soon.
Tomorrow we go further鈥�
鈥y colleague, Steve Barclay the Economic Secretary to the Treasury, will launch our Second Investment Management Strategy to ensure our world leading asset management industry continues to thrive:
We鈥檝e established a new Asset Management taskforce to shape the strategy and lead work between government, regulators and industry to enhance the UK鈥檚 position as Europe鈥檚 leading asset management centre;
We鈥檙e backing new centres of excellence, linked to higher education institutions, to build a pipeline of talent and expand our skills base for the future;
We鈥檙e supporting projects to position the UK as a leader in FinTech asset management solutions, such as developing lower cost digital funds;
鈥nd finally, we will consult in due course on how we can improve the tax treatment of short-term business visitors from foreign branches 鈥� something which I know has been an issue for financial and professional services firms.
Of course, I recognise that for companies in this room, a key focus right now is the outcome of the Brexit negotiations.
You will forgive me if I don鈥檛 offer a blow-by-blow commentary of the last 48 hours鈥�
鈥鈥檒l leave that sort of speculation to the newspapers鈥�
鈥lthough I have had a very productive day in Brussels鈥�
鈥ut I can tell you that we have made good progress in the negotiations over the last few weeks鈥�
鈥nd I am optimistic that we will achieve sufficient progress at the Council next week, and move on to the next stage of the negotiations.
And in those negotiations on our future relationship鈥�
鈥 have every confidence that we will reach an outcome that supports the UK鈥檚 position as the number one global financial centre鈥�
鈥n outcome that represents a good deal for our Financial and Business Services industry.
At my Mansion House speech in June, I spoke of three principles to underpin a good deal on financial services:
The importance of a smooth and orderly exit鈥�
鈥he importance of preserving reciprocal access to each other鈥檚 markets for goods and services鈥�
鈥nd the importance of a permanent, stable, future financial services relationship.
I鈥檒l touch on each of these briefly.
First, our intention that our withdrawal from the EU be as smooth and orderly as possible.
Because one of the biggest boosts we can provide to the economy鈥�
鈥f both the UK and the EU鈥�
鈥s making early progress on delivering certainty and clarity about our future relationship with the EU鈥�
鈥ith a time-limited implementation period of around two years鈥�
鈥hen we will have left the EU and will therefore be outside the EU Customs Union and the Single Market鈥�
鈥ut during which we will replicate the effects of the Customs Union and the Single Market鈥�
鈥ith reciprocal access to each other鈥檚 markets鈥�
鈥nd a harmonised customs arrangement, ensuring a low friction border.
Giving businesses continuity, and certainty, to plan and invest with confidence.
The second principle is that our future relationship should be as deep and broad as possible.
The Prime Minister鈥檚 vision is of a deep and special partnership鈥�
鈥ased on strong mutual respect and friendship鈥�
鈥lose collaboration on security鈥�
鈥nd freest and most frictionless trade possible.
Something more ambitious than any existing mere free trade agreement鈥�
鈥omething that properly reflects our 43 years of membership of the EU and the common regulatory starting point that follows from it.
The UK and the EU鈥檚 financial services sectors operate as a single marketplace.
And we must protect this鈥�
鈥ecause a fragmentation of this European financial services market will only lead to poorer quality, higher priced services for business and citizens across Europe鈥ncluding in the UK.
And that, in turn, would erode the global competitiveness of firms across the full breadth of the EU economy.
鈥淚 am convinced that for Europe as a whole鈥t鈥檚 in our own interests to have a strong financial centre in London.
We can鈥檛 move the whole business to Europe and it鈥檚 better to have it in London than in Singapore or elsewhere in the world鈥�
Those are not my words.
They are the words of Wolfgang Sch盲uble the former German finance minister.
He is right.
Paris and Frankfurt wouldn鈥檛 be the winners from a fragmented European market鈥�
鈥t would be New York, Singapore, and Hong Kong鈥�
鈥eaving Europe as a whole, weaker and poorer.
So we want to protect our existing trading relationships with the EU.
But we also want to ensure that the future trade arrangements we have with the EU are durable and fair鈥�
鈥ith the effect on cross-border markets well understood and transparently agreed between us from the outset.
And that is particularly important for financial services鈥�
鈥ecause no existing trade agreement, nor third-country access arrangement, could support the scale and complexity of reciprocal trade in financial services that exists between the UK and the EU.
And that takes me on to the third principle:
We must develop a new paradigm for our future trading relationship in financial services.
Over the past ten years, Britain has worked tirelessly with the EU to deliver financial stability and fair competition.
We devised the rules that have seen our banking sector recover from the Global Financial Crisis鈥�
鈥nd after we leave the EU we will continue to work closely to strengthen the global financial system and protect our taxpayers.
There will be no race to the bottom.
We will need intensive regulatory cooperation for rule-making to ensure parity of outcomes鈥�
鈥nd we will need new mechanisms to address key cross-cutting issues, from dispute resolution to data protection.
We will need a deep and comprehensive framework of standards鈥�
鈥hat ensures unprecedented transparency and supervisory cooperation.
It is only in this way that we can entrench and enhance financial stability鈥�.
鈥hat we can protect consumers and taxpayers鈥�
鈥nd ensure that the open and cooperative system we have built together since 2008 is maintained and strengthened鈥�
鈥or the immeasurable benefit of the economies of both the UK and the EU.
We do not expect all of this will be easy.
But it is worth the effort.
And it will take intense effort from all of us, in government and in business鈥�
鈥n the UK and in the EU鈥�
鈥o continue making the case for an outcome that protects jobs and prosperity鈥�
鈥nd for a transition that takes us to it smoothly and protects natural stability.
It鈥檚 a challenge to which you will rise鈥�
鈥s you have risen to challenges that have gone before.
I am confident that the UK鈥�
鈥nd the UK financial and professional services sector鈥�
鈥ill continue to flourish鈥�
鈥dapting to whatever the world throws our way鈥�
鈥nd seizing the opportunities of the technological revolution which is upon us鈥�
鈥nd together I know that, we will build an economy that is fit for the future.
Thank you.