Extensive cutbacks on hospitality spending risks curtailing the City's enjoyment of the 2018 season, which kicks off next week with the Chelsea Flower Show.
Curbs on discretionary company spending, FCA crackdowns on perceived conflicts of interest and fears of being caught by the Bribery Act all signal reduced participation from City firms this year in the traditional round of summer social events, which takes in Henley, Wimbledon, The Derby, Royal Ascot and finishes with Glorious Goodwood in late July.
One top PR figure said yesterday: “My City pals all tell me they’re not taking clients like they’re used to, and they’re not being invited like they used to. Corporate hospitality is right down.”
Helen Anderson of the Chartered Institute for Securities and Investment (CISI) said: “We regularly hear feedback from our members that, due to increased regulation, there is a decline in corporate hospitality across the sector.” The regulation Anderson refers to consists of the Bribery Act 2011, along with tighter rules more recently from the Financial Conduct Authority (FCA).
Some in the Square Mile point to a feeling of resentment that the City has been singled out for the crackdown. One senior fund manager said: “It does feel that other service industries, consultants, accountants, lawyers, seem not to be under the same regulatory pressure or indeed taking the law as seriously as we are. It is quite clear that we operate with a higher level of probity.”
He continued: “I think it’s a reaction to the perceived excesses of the past, and it’s the general political reaction to the financial industry being blamed as the cause for the great recession.”
Traditionally, the prestigious sporting events of the English summer social season have been key opportunities for mixing business with pleasure right across the financial sector, from investors to company chairmen. It all kicks off with the Chelsea Flower Show’s exclusive Gala Preview, a week tonight. But times are changing.
The senior fund manager told City A.M. that his own company had now introduced such a tight in-house limit for spending on clients that it had all but destroyed the days of client lunches.
“In my business, we build relationships over a long time with people I have known for decades, and now I wouldn’t dream of having lunch with them because it’s just too difficult.”
“I went to a lunch meeting at the Royal Exchange with a very well-known city strategist a while back, and one senior fund manager at the table refused any offer of food and water because they didn’t think their compliance would allow it”.
He said that the bureaucratic gift registers, coupled with the fear of not understanding the ambiguous rules, resulted in him having to turn away potential business opportunities: “I’ve had companies ask me to accept gifts and I have had to say I can’t”.
He added: “I can’t remember the last time someone rang me up and said let’s go to Twickenham.”
Such comments stand in stark contrast to the assurances given by then Justice Secretary as the anti-bribery legislation was being introduced. Ken Clarke, who insisted in 2011 that: “No one is going to try to stop businesses getting to know their clients by taking them to events like Wimbledon, Twickenham or the Grand Prix”.
Jonathan Pickworth, a senior lawyer who specialises in white collar crime, said: “What has changed since the Bribery Act came into force is that more care is being taken over what is acceptable, and many banks have updated their policies on what they will allow their own staff to accept.”
“Some banks make clear to their suppliers that entertainment of their staff is discouraged and – if a tender process is underway – prohibited. But it is all really just common sense – make sure you understand why it is appropriate, and keep it reasonable.”
A spokesperson for the Chelsea Flower Show said last night: "In spite of the new financial regulations our position at RHS Chelsea remains strong with M&G Investments renewing their contract as headline sponsor and tickets to the RHS Chelsea Flower Gala Preview selling out."