UK finance and growth strategy repeats old mistakes and favour cor

The UK government recently unveiled a new Financial Services Growth and Competitiveness Strategy, which calls for shorter applications for businesses seeking to get regulatory licenses as well as making the UK an attractive place for investment.  

The Strategy promises to deliver several policy goals in the next decade, including delivering a “competitive regulatory environment”, “embracing innovation” and “building a retail investment culture and delivering prosperity through UK capital markets.”  

The Balanced Economy Project believes the government’s new approach risks yet another race to the bottom in regulatory standards, and serves as a painful reminder as to how deeply embedded the “deregulation = growth” narrative has become in UK political circles.  

Since as early as the 1990s, the UK’s financial sector has roughly doubled in size, increasing from just over 5% to a peak of almost 10%, and yet policymakers still consider financial deregulation as the most viable option for growth across the broader economy.  

‘Big finance’ is also a key driver of rising monopolisation, enabling investment bankers to accelerate mega-mergers and acquisitions, or banks channeling cheap capital at high profit monopolies, while depriving smaller competitors of much needed finance.   

“Trying to make the sector bigger by encouraging it to take risks that ultimately lead to a devastating financial crisis is the exact opposite of what sensible policymakers would do,” said Financial Times commentator Martin Wolf. “We know that decision makers within the industry will never take the full costs of their collective failures into account, because they do not bear them: society as a whole does.”  

“Without confronting the structural reasons why the financial system has failed to support the real economy, while risking a race to the bottom in regulation, the strategy risks repeating old mistakes,” added Jesse Griffiths, CEO of The Finance Innovation Lab.   

The Balanced Economy Project echoes these views and calls on the UK government to construct an economic strategy that prioritises the real economy, workers, small businesses, the public good and sustainability, not just a bloating of an already large and powerful finance sector.