In a time of geopolitical uncertainty, the UK must do everything for growth

Monday 02 December 2024 5:12 am  |  Updated:  Thursday 05 December 2024 1:41 pm

While we await the inauguration of Donald Trump, the UK must do everything within its power to ensure economic growth at home supports a strong voice for the UK abroad, says Chris Hayward

We’re now a little over a month away from the inauguration of the 47th President of the United States of America. I wish him well. Understandably, there is an increasing focus on the challenges and opportunities Trump’s second term presents UK policymakers. As global headwinds threaten to blow the UK off course, we must do everything within our purview to pursue growth on the home front.

This was the driving thought behind the City of London’s Vision for Economic Growth—a roadmap to prosperity, a report published last year that identified the £225bn investment prize for the UK. This report has formed the backbone of our response to the Government’s consultation on its 10-year industrial strategy, released alongside the Investment Summit hosted at Guildhall.

Broadly speaking, our response focuses on raising investment levels, supporting a digital-first economy, and solidifying the UK’s reputation as a leader in sustainable finance. Given that two of the eight identified sectors are financial and professional services, a seat for the City of London Corporation on the independent Industrial Strategy Council is the logical next move.

Indeed, the UK’s financial services sector plays a foundational role in supporting many other sectors vital for improving the UK’s poor productivity growth. Without movement on this front, living standards will continue to stagnate, with the UK falling further behind its international peers.

It’s time for some home truths. From Ireland to Singapore, our global competitors already have established inward investment strategies in place. Appointing Poppy Gustafsson OBE as Investment Minister is a good move, but Whitehall must make sure she is equipped with the resources she needs to succeed.

Make no mistake; the UK has many important successes to trumpet. Our Fintech story is exemplary, and we rank only behind the US and China for AI investment.

Yet London’s fixed internet speeds are nearly twice as slow as other global financial centres. This is embarrassing. We must be more competitive in data and digital. This speaks to a related concern about the need to buttress the UK’s operational resilience to ensure future growth is built on firm foundations given the geopolitical backdrop.

The good news

The good news is that progress is being made on multiple fronts. Our regulators now take greater cognisance of their role in promoting economic growth – as we’ve advocated. The future-focussed Financial Conduct Authority demonstrates an approach that improves innovation, another central plank of putting productivity growth on a more positive trajectory. Growth and risk are two sides of the same coin.

Sustainable finance is another area where the UK has a strong global story. The next steps are clear: we must create the right conditions for innovative approaches to scale up and accelerate financing for a just transition to a low-carbon economy. Achieving success is essential, especially considering the tens of billions needed to bridge the financial gap with the UK’s climate policy ambitions. I recently led the City of London Corporation’s delegation to COP29, which focused on the role of the private sector. Here, the UK has shown clear leadership. It was our pleasure to launch the Transition Finance Council alongside the Government, to take forward recommendations from the Transition Finance Market Review. 

There are, alas, some trickier waters to navigate. Policy stability is the bedrock of economic growth. Yet future decisions from the world’s largest economy could present a challenging outlook for global climate policy.

Elsewhere, openness – in both trade and attracting talent firms need to flourish – are trusted tools for fine-tuning investment offers. The UK’s financial and professional services community will hope political decision-makers deliver policies that strengthen, rather than stymie, global prosperity.

While we await the inauguration, the UK must do everything within its power to ensure economic growth at home supports a strong voice for the UK abroad. The City of London is ideally placed to assist the Industrial Strategy Council to do just that.

Chris Hayward is chairman of the policy and resources committee at the City of London Corporation