Financial and related professional services – an engine for growth across the UK

29 September 2015

Finance, banking, accountancy, IT, consultancy and the law are of course a huge and usually profitable sector of the British economy in their own right. Around two million people are employed and these are well paid and interesting jobs. They are major exporters too, accounting for 14 per cent of British exports.

So obviously any sensible government will wish to see it flourish and act to encourage it, for example by ensuring there are enough people with the right education to meet its needs.

It is clear that in London, Edinburgh and to some extent Leeds this sector drove growth in the 15 years up to 2008 and still has a major role to play.

At the same time if financial services are truly to be an engine for growth across the UK their relationship with other sectors needs to develop. Providing appropriate finance for corporates, especially SMEs and innovative businesses, must improve if the sector is to fulfil its potential as an engine for growth.

In any constituency in County Durham there are a significant number of small engineering businesses and it is a problem that to talk to someone they have to make a four hour round trip to Leeds. So either the banks need to have a better network of managers locally capable and charged with developing long-term relationships and making decisions, or we need better IT connectivity. In Germany, local banks and local chambers of commerce have been more successful at building local economies.

This issue of access to finance for SMEs is a long-standing problem in the UK – Harold Wilson was worrying about it fifty years ago.

Following the crash the banks have been put under two – admittedly not wholly congruent – pressures to rebuild their balance sheets and to improve SME lending. They have made more progress on the first than the second.

This failure was acknowledged by the former Secretary of State for Business, Innovation and Skills, Vince Cable, when he set up the British Business Bank – a £3.9 billion government initiative to fulfil the role which should have been undertaken by the commercial banks.

Labour has similar proposals for a British Investment Bank with a regional network. These government interventions are needed because the commercial sector does not seem to be developing its capacity at the scale and speed needed. At the same time the private sector should be looking to learn from the public sector to develop their own freestanding services.

Helen Goodman MP, Member, Treasury Select Committee
@HelenGoodmanMP

This article was written for the Reform Annual Journal to accompany the Labour Party Conference event “Financial and related professional services: an engine for growth across the UK”.

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