The vaccination rollout campaigns in both the UK and across the world have allowed us to start dreaming of life after the pandemic. As the global economy begins to open back up again, we will start to see the green shoots of our recovery.
One important way that the financial and professional services sector is supporting the recovery is by facilitating international trade. The UK is the largest net exporter of financial and professional services with a trade surplus of £79.7bn in 2019, providing services to customers all around the globe.
A new report from the International Regulatory Strategy Group (IRSG) – which is co-sponsored by the City of London Corporation and TheCityUK – highlights the importance of regulatory coherence to enabling the trade that will facilitate future growth.
At a time when we are seeing fragmentation increasingly inhibit cross-border market access, the IRSG’s message is that only by making a renewed commitment to regulatory coherence can international policymakers support progress on challenges to future economic growth, such as climate change, cyber-crime and financial crime.
The importance of this to our vision for a sustainable and equal recovery cannot be overstated. Regulatory fragmentation in the financial services sector reduces choice and increases costs for customers, while also consuming 5-10 per cent of annual global turnover. This is inefficiency we can ill-afford as we look to stimulate the economic growth so essential for job creation.
To remedy this, the report recommends three key steps.
Firstly, it calls upon global regulators to foster operational resilience of global supply chains across the industry.
Secondly, it calls for innovation in digital governance. This includes a need to share information across critical emerging areas such as cyber security, data privacy, cross-border data transfers, fintech and regtech – to avoid regulatory fragmentation, promote an open and level-playing field, and mitigate emerging digital security risks.
Finally – and perhaps most importantly – it calls for the development of a better financial services framework for incentivising green finance, financial inclusion and sustainable finance objectives, including common standards on disclosure, enhanced ESG data and ratings. This is simply essential, as we look towards achieving real progress at COP26 and address climate change as the UK’s number one foreign policy objective in the years ahead.
As we begin a new chapter in our trading history, I’m very pleased that the UK Government takes a similar view, as shown by placing the promotion of open and free trade at the heart of its new integrated foreign policy review. The UK Treasury’s granting of equivalence to the EU firms is demonstrative of this new attitude, and it is absolutely right that we have sought to prioritise reform of the multilateral trading network, especially through the WTO. Households and businesses around the globe will be the biggest winners from common international standards and cross-border collaboration.
So as we look to support our economic recovery, we must avoid doing so with one arm tied behind our backs. To drive growth we must reach a new global consensus on regulatory coherence, so that we can unlock the opportunities of tomorrow.
The livelihoods and living standards of millions – not to mention the future of our planet – are at stake.