LONDON: The British government should review its regulation of the financial sector to ensure the U.K. remains an attractive place to do business, John McFarlane, the chairman of Barclays PLC and lobby group TheCityUK will say in a speech.
Mr. McFarlane, speaking in his capacity as the chairman of TheCityUK, will warn that longer-term threats to U.K. attractiveness are posed by sector-specific levies and surcharges, saying they “may have negative implications over the longer term that we risk realizing only when it is too late.” Mr. McFarlane will say the government should launch a review of rules put in place following the bailout of several banks, to ensure the finance sector isn’t impeded by unintended consequences of tighter regulation.
“London is the world’s leading financial center and TheCityUK’s priority is to keep it that way,” he will say. “Staying the same simply will not cut it. The economic balance of power is heading east and the technological revolution means business must strive harder to compete. It needs the support of government to win.”
The lobbying comes as British-based financial groups continue to complain that they are at a disadvantage compared with more lightly regulated foreign rivals. A particular gripe has been a U.K. tax on bank balance sheets and a European-wide cap on bonuses. The government has already pledged to phase out the tax over coming years and replace it with a surcharge on profit. Earlier this year U.K. Chancellor George Osborne, said he would lower the U.K.’s corporate tax rate to 18% over the next five years, making it the lowest in the Group of 20 major economies.
Compliance costs, following a slew of scandals, and poor profitability are hindering British banks’ ability to quickly recapitalize. Meanwhile U.K. regulators have taken a hard line with banks to avoid a repeat of the 2008 financial crash which hobbled the economy. In April HSBC Holding PLC said it would review whether it should be based in London. U.K. regulators have since slightly softened their stance towards the industry. Not all are disheartened. Insurer Prudential PLC has said it would stay put. Standard Chartered PLC Chief Executive Bill Winters said the Asia-focused bank has no current plans to leave.
U.K. Prime Minister David Cameron has pledged to hold a referendum by the end of 2017 on whether the U.K. should leave the European Union.
Mr. McFarlane, will also say that most of the group’s members are in favor of staying within a reformed Europe. “It is imperative that we do our part in shaping the reform agenda that supports the Government here in the U. K.—and indeed other Governments—to create an outcome that the voting public can choose with confidence,” Mr. McFarlane will say.
