The European Commission yesterday launched its action plan for a Capital Markets Union – or CMU for short. The initiative is designed to build a true single market across all 28 EU member states.
The UK strongly supports this. We have called for the EU to focus on what people across Europe need most: jobs, economic growth and financial stability. And we have been clear that can only happen if the EU takes steps to improve its competitiveness and stimulate investment. That is a key part of our reform agenda.
Developing an effective CMU will help achieve these aims. By lowering the costs of cross-border investment and creating deeper, more liquid capital markets, the CMU will help our businesses – from startups to infrastructure projects – get the access to the finance that they need to grow and succeed. And it will create a better range of opportunities for people to invest their money in successful ideas, pooling investment from across the single market.
There’s no doubt that this initiative is a welcome one. In 2007, Europe’s stock market capitalisation, as a percentage of GDP, was 85 per cent. In 2013 it was 64.5 per cent. Compare that to 138 per cent in the US, and 94 per cent in Japan, and it’s clear that we need to do a lot more to boost capital markets in the EU.
Domestically, we are in a good place – Britain’s capital markets are nearly twice as developed as the rest of Europe, and stock market capitalisation is over 120 per cent of our GDP.
But across the EU, the single market for capital is much more fragmented: 94 per cent of Europeans say they have never bought a financial product outside their home country. And while people in the EU save more than in the US, these savings tend to be concentrated in the banking system.
So the CMU will help UK institutions extend their offerings, and sell our competitive products to people across the single market – as well as allowing us to provide a wider range of cost-effective funding to SMEs across Europe. This is a classic example of something that is good for the UK, and good for Europe.
All of Europe will gain if we succeed in opening up access to finance and connecting our market. That is why the UK has played an important role in shaping the Commission’s work in the run-up to yesterday’s action plan.
The plan sets out a range of suitably ambitious initiatives. A small number are legislative, but most are about taking a detailed look at what works best in a wide range of markets, such as crowdfunding, improving SME credit information, or long-term infrastructure investment – and then promoting and sharing best practice.
These are areas where the UK – the world’s most competitive financial centre, as we read on these pages last week – has a lot to offer, as well as a lot to gain. We look forward to working closely with the Commission and with European partners to help the CMU succeed and deliver for all of the EU’s member states.
This is an important step forward – and excellent news for those of us who believe, like the Prime Minister does, that the EU can deliver the pro-growth, single market reforms that the British people have asked for.