Director of economics at business organisation, Confederation of British Industry (CBI), Rain Newton-Smith, has commented on recent research that the organisation conducted and believes that the UK government should concentrate more on retaining their position as financial centre of the world.
“The cost of regulation and tax uncertainty are a top concern for firms across the sector. They want to see the government focus on keeping the UK a competitive financial centre by not putting UK firms at a disadvantage,” Newton-Smith told the Guardian.
CBI’s survey revealed that banks and other financial institutions believe that the government’s top priority should be cutting regulation costs and increasing stability in the tax system.
The Guardian explained that if banks were forced to comply with these rules and therefore, pay the regulation costs, it would result in a lack of money to spend on company expansion, an important venture if the UK wants to remain at the financial summit.
The publication of this survey comes at an interesting time as the chancellor George Osborne will present the budget on the 8th July.
In hope that Osborne will consider their needs, companies insist that banks should not be condemned and rules created for the prevention of another financial crisis should be eased, according to the Guardian.
Banks such as Barclays have advised the government to change rules surrounding the barrier required by 2019 which will separate retail and investment banking. Alongside this, they are also against the introduction of criminal liability for banking senior executives who act in a way that causes harm to the company. HSBC, on the other hand, have taken a more powerful approach and will leave the UK if regulation costs are too high.
In collaboration with PwC, the survey showed that while banks and other financial companies have said that regulation is the reason why their business has stopped growing, the survey found that bank confidence has also decreased despite profits rising in the last three months at its fastest pace since March 2011.
UK financial services leader at PwC, Kevin Burrowes, said that confidence is low in banks this quarter as news about regulations and the EU referendum has dulled the outlook. “Levels of optimism among banks remain broadly unchanged this quarter, which is a little surprising as we had expected to see a bounce from the election result and the greater encouragement for financial services from the new government. However, ongoing regulatory uncertainty, the EU referendum and other macro-economic factors have dampened the outlook at least in the short term,” Burrowes said.
However, not every bank is in opposition of the increased regulation costs. Chief executive of Lloyds Banking Group, Antonio Horta Osório, remarked this month that banks should not complain about the ringfence between retail and investment banking, as well as regulations, according to the Guardian.