COV0067

Written evidence from the City of London Corporation

Submitted by the Office of the City Remembrancer

Overview of the UK Financial and Professional Services (FPS) Sector

1. As a global financial centre, maintaining the City’s international competitiveness should be a key policy objective. This will benefit the wider economy through jobs, growth and tax contributions, underpinning sustainable long-term economic growth for the UK.

2. The UK FPS sector appears to have coped relatively well with the impact of the Covid-19 crisis. Firms have reacted with agility to adopt work-from-home models, helped by their previous investment in technology, and UK regulators have been both responsive and flexible.   Capitalisation and liquidity have also held up well, thanks to some of the measures adopted after the financial crisis a decade ago. 

3. In the absence of physical contact with City stakeholders, the City of London Corporation, through the Lord Mayor and Chair of Policy and Resources, has undertaken a series of calls with over 100 key stakeholders in UK financial services at CEO/Chair level to discuss the impact of Covid-19 on their businesses, the UK’s recovery and to identify areas for cooperation. Participants in this Virtual Engagement Programme include City firms, overseas investors, cross-UK partner cities and international partner financial cities such as Tokyo, Singapore and across China.

4. The objective of the programme is to listen, to share best practice, highlight key areas of concern and to offer support where possible. This feedback and intelligence will be used to inform government and to help focus future work. Initial findings indicate that senior figures are keen to engage. In the immediate term responses appear well organised, with technology and the constructive approach of regulators crucial.

Recovery from the Current Crisis

5. FPS will have a key role in the recovery from the current crisis, especially through the recapitalisation of the economy but this will rely on strong global frameworks and co-operation. The City Corporation remains committed to working with the industry, government and regulators to ensure that the UK maintains its global competitiveness and continues to be an attractive place to work and invest.

6. Despite its underlying strength, the UK FPS sector is not complacent and London will not be immune from the many global economic consequences which will take time to work through the system.  There will be rapid changes to many business models and working practices, and the situation will prompt the acceleration of changes to the sector that were coming anyway, notably greater digitalisation and ‘greening’.  

Embedding sustainability into finance

7. There is an appetite from industry for a green recovery, with over 150 global corporations signing a statement urging governments around the world to align their Covid-19 economic aid and recovery efforts with the latest views on climate action[1]. As part of the virtual engagement programme, the City Corporation is engaging with industry to clarify what firms want to see in terms of a green recovery long-term. This might be conditions on financial relief (like those in Canada where climate-related financial disclosures are mandated for ailing firms to receive financial aid) or green jobs programmes.

8. The City is keen to ensure attention is given to a green recovery. Covid-19 has demonstrated the resilience of sustainable investment. The core thesis of ESG – that non-financial risks can be as material to resilience as financial risks – has come to pass as ESG strategies outperform in the global economic downturn. It is now widely agreed that sustainable finance will be a core principle of recovery. It will be important that the UK is at the forefront of describing and actioning the components of what the green led recovery will entail. Should the Government decide to accept the National Infrastructure Commission’s recommendation for a UK infrastructure bank, it will have the potential to play a significant role in co-ordinating the necessary investment to achieve the UK’s net zero ambitions. In the lead up to COP26, the industry has a powerful message to deliver which both can help green the economic recovery from Covid-19 and develop an investment pathway to net zero for the longer term. The UK is the best placed financial centre to drive this growth.

9. The City of London Corporation is committed to working with government and financial services firms to achieve a green and socially responsible recovery and to ensure that London sustains its position as a world leading centre for sustainable finance.  The City will host the Green Horizon Summit in November 2020 to act as a landing point for private sector green finance initiatives and related announcements, as well as a launch pad ahead of COP26 in Glasgow. The International Regulatory Strategy Group[2] is looking at what new policy and regulatory measures could be developed to support greening the recovery as well as developing industry thinking on social global standards.

August 2020