Hello everyone, and welcome to TheCityUK Annual Conference.
Before I start, I’d like to thank our gold sponsors - Citadel Securities, DLA Piper, DTCC, Guernsey Finance and RepRisk.
And special thanks also to Fidelity International, our platinum sponsor, my own firm of course, and to all my colleagues in the audience.
It’s wonderful to be with you all today and it brings to mind the first time I took the podium here.
It was 2022.
We had a political leadership in turmoil, a geopolitical crisis in the form of Russia’s invasion of Ukraine, and the gradual opening up of a post-Covid world, with all the hybrid meetings and 'you’re on mute’ conversations that ensued.
Back then, Collins Dictionary selected “permacrisis” as its word of the year, defining it as “an extended period of instability and insecurity.”
In 2022 our PM was a sprightly Mr Johnson. And the Chancellor of the Exchequer, a fresh-faced Mr Sunak.
Now, in 2024 – a duet of Prime Ministers and a trio of Chancellors later – we are on the verge of major elections here and abroad, still swamped by a variety of geopolitical crises, the challenge of climate change, and all the while preparing to make the sharp adjustment to working life in the Age of AI. Permacrisis – what permacrisis?
Because, this is on the back of a decade and a half of shocks, from the fall of Lehman Brothers to the Eurozone crisis, from Brexit to cossie livs, as the young ones call the cost-of-living crisis.
Shocks - and these are all substantial shocks - tend to create fear and a sense of anxiety that can pervade all aspects of our everyday lives. We seek stability, we become cautious, we avoid risk – and that effect can be seen at every level of society, from government, to business, to individuals.
But that very – and understandable - caution has a cost.
Yes, risk is inherent in any human endeavour, including in financial services.
But attempting to strip all risk out of our financial system, our economy, and our society will lead to stagnation, a lack of investment, innovation, and ironically, increase the risk of adverse outcomes for individual, for communities and for the country.
This industry, which so many of us have dedicated our careers to, plays an absolutely vital role in driving investment, fuelling economic growth, bolstering productivity, helping tackle climate change, and enabling individuals to save for the future and build financial resilience.
It is, to a large part based on managing risk, balancing the upside and the downside and mediating between different appetites for, or views of, what constitutes risk.
As Mark Twain said: “It is a difference of opinion that makes a horse race.”
This meeting, matching, mediating and managing between different parties that is at the heart of financial services makes a significant contribution to the UK economy. In 2021, financial and related professional services contributed £254 billion to the UK economy and employed nearly 1 in 13 people nationwide, with around half of our £135 billion in exports originating outside London.
And while caution is a natural and valuable human reaction in many situations, excessive caution – or reckless prudence, as I sometimes call it – can also become self-defeating, especially for the UK’s global role at this juncture.
This economic engine at the core of our country’s resilience and international competitiveness, requires the right conditions to keep humming.
It needs a proportionate, certain and aligned policy and regulatory environment.
It needs space to experiment, innovate and nimbly adapt to accelerating global change.
Most of all, it needs the confidence to ease the flow of investment capital to productive uses.
And yet, there are concerning signs that the pendulum of public and political sentiment has swung too far toward risk aversion and "safetyism."
With our instinct to protect consumers from any possibility of harm, we risk regulating away their upside too.
An excessive emphasis on derisking the system can perversely increase risk - whether it's the risk of individuals falling short in retirement because they couldn't access appropriate investment options, or the systemic risk of an economy starved of growth capital.
And, ultimately, invention and innovation is grounded in taking risks. How many great human breakthroughs would we have without pioneers willing to push boundaries? And how many of the great societal challenges in the years ahead – whether climate change, an ageing population, healthcare or others – can be met without encouraging engineers, technologists and, yes, the people that finance them, to take risks?
Of course, bad actors should be rooted out and face consequences. Of course, we must manage systemic threats.
But policies and proposals, such as the premature disclosure of all enforcement investigations, including those that end up unsubstantiated, will only incentivise excessive caution and suffocate innovation.
A system shaped by timidity will struggle to behave creatively, expansively and boldly. And it will limit the rewards and growth our policymakers so desperately want to deliver.
As we seek to remain competitive on the global stage, our watchword should be balance, not total risk avoidance.
Regulators need to carefully weigh trade-offs and unintended consequences.
Policymakers need to align around a coherent strategy, then allow reasonable space for industry to operate within it.
And we in industry must create an environment where customers are empowered and entrusted to make informed personal decisions and trade-offs suited to their own goals and circumstances.
Because make no mistake, there is also profound risk in resisting change, in clinging rigidly to the status quo.
Cash savings eroded by inflation.
An economy deprived of the investment needed to spur growth, job creation and the transition to net zero.
Individuals cut off from the wealth-building benefits of markets.
These too are risks that a healthy system must manage.
To be clear, this is not a call for what some loosely describe as deregulation.
It is a call for the next government to commit to a long-term strategic approach to investment and growth. One that clearly understands policy and regulation must be designed and implemented with transparent consideration of risk and growth trade-offs.
It is a call for growth-focused oversight across government and regulators and swiftness in correcting when well-meaning policies produce unintended outcomes.
It is a call for government, regulators and industry to work cooperatively as participants in a shared system that serves individuals, the economy and society.
Here, I think the financial services industry has an important role to play.
Creating the right environment for investment will get us the better retirement outcomes, economic growth and productivity improvements our country needs. As well as supporting the financial resilience of individuals and households across the UK.
We must be advocates for the positive power of investment, especially during anxious times when clients and customers may be prone to retrenchment.
We must work to differentiate and prove our value as an engine of economic activity even as macro-economic conditions tighten our margins.
And we must nimbly adapt to harness the power of new technologies like AI to better serve customers, boost economic productivity and support climate adaptation.
To conclude, we are gathering at a pivotal moment - for the UK, for the financial and related professional services industry, and indeed for the global economy.
The past 15 years have delivered shock after shock - financial, geopolitical, medical and technological. As Andy Haldane of the Royal Society of Arts recently wrote, "The game of life is a game of snakes and ladders."
And lately, it seems we've developed a heightened phobia of the snakes and an acute mistrust of the ladders.
But the UK has a remarkable legacy of resilience and innovation to build upon.
And in this room, we have immense human talent and institutional strength.
In the end, our future hinges on taking decisive and collective action to enable greater investment to drive long-term sustainable growth, the transition to net zero, and the financial resilience of individuals and families.
It hinges on striking the right balance between protecting against risk and enabling productive risk-taking. It hinges on sound judgment and swiftness in adapting to change.
And most of all, it hinges on having the courage to keep climbing the ladders, even as we keep a watchful eye out for snakes.
The conference today is a forum to talk through how we go about this task.
The very next panel is about driving sustainable growth, and, later on, I’ll also be chatting to The Right Honourable The Lord Sedwill, about his experiences managing extreme risks, including, I hope, the time Saddam Hussein’s bodyguards waved a gun in his face.
So, I hope you enjoy the day and that we find new ways to work together collaboratively and in good faith, to navigate this moment of challenge and lead our industry to make an even greater contribution to the UK’s competitiveness.
And perhaps, in doing that, we’ll be a part of the “permasolution” to the “permacrisis.”
Thank you
