UK as a Financial Services Hub — [Graham Stringer in the Chair]

Part of the debate – in Westminster Hall at 9:30 am on 6th February 2019.

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Photo of Bim Afolami Bim Afolami Conservative, Hitchin and Harpenden 9:30 am, 6th February 2019

I completely agree that we need to make it easier for graduates to stay. My understanding is that the Home Secretary has extended the time in which graduates may search for a job in Britain—I think up to 12 months. I would like to see that go up further, and I think the Home Secretary is quite amenable to that. We have to be honest: if we are thinking about immigration caps and the like, we should not turn away graduates, who will often be the brains of new businesses. We should help as many of them as possible to stay here; I agree with my hon. Friend on that point.

Brexit obviously dominates Parliament and Whitehall at the moment. We are in fast-moving times, so I will offer no predictions, largely because by the time anyone sees this debate, they would be completely out of date. As things stand, the political declaration that sits alongside the withdrawal agreement explains that the UK will have access to the EU market, and vice versa, under an equivalence regime. That means that the usual equivalence assessment will need to be undertaken for UK firms in the EU market, and the UK will have a similar equivalence process for the EU. Let me explain the notion of equivalence for those who are not familiar with it, with reference to the European Union. Essentially, the EU may look at a set of regulations that govern a certain area of financial services, such as bank lending, and deem another country’s regulations equivalent to its own, thereby allowing firms based in that other country to sell products to customers—individuals and firms—in the European Union.

Our reliance on an equivalence regime leaves me with three questions. First, to what extent do the Government wish to align themselves with EU regulations at a time when the European Union is pushing ahead in a much more restrictive and onerous direction, in regulatory terms? In recent years we have seen the alternative investment fund managers directive, the cap on bankers’ bonuses, MiFID II and other regulations, which were often well intentioned but have tended to increase costs, reduce Europe’s competitiveness and increase complexity. That has made accessing financial services more expensive, more complicated and not necessarily any safer for the consumer. I believe that onslaught of complicated regulation has led in part to the poor productivity of financial services since 2008. Productivity has slowed by just over 2% in the past 10 years.