By Daniel Hunter
Envious EU countries are out to tie the City of London up in regulatory knots, says a report from the Adam Smith Institute. The independent economic think-tank says the UK needs to act now to preserve the future of its most important international earner.
Instead of submitting to onerous regulations inspired by our competitors in Paris and Frankfurt, the UK should call for simple and fair regulations that apply across the world. That, it says, would create a world market in which London could excel, rather seeing business move to Singapore and other low-cost centres.
“The UK should campaign for global rules that promote competition and innovation, rather than loading Europe and the UK with costs,” said the report’s author, regulation expert Tim Ambler. "Those rules should focus on protecting consumers and promoting trade, not creating larger and larger rule-books that nobody can possibly read.”
Ambler says that thousands of pages of EU regulation could be replaced with just eight key principles to promote honest trading.
“Regulation is already strangling the financial sector and there are just two ways to correct this,” he continued. “One is for the UK unilaterally to cut out the red tape and hope others will follow. But a better way is to recognise that finance is a global industry, needing global regulation, and for the UK to campaign to make this regulation as light as is needed to protect customers.”
Noting that only one new retail bank has been set up in the UK in the last 130 years, the Institute argues that the complexity and cost of financial regulation now seriously discourages competition in the UK and Europe. Increasingly, City firms will see their business by competitors in Asia and elsewhere. It argues that the new City regulator, the Financial Conduct Authority, should be “strangled at birth,” with the Bank of England regulating providers and the Financial Ombudsman Service looking out for customers.
Dr Eamonn Butler, Director of the Institute, added: “Not content with drowning our main industry in red tape, we are letting our competitors in Paris and Frankfurt pile on more. The UK government needs to come out, fists flailing, to campaign for effective but low-cost regulation across the world, rather than allowing us to become an uncompetitive backwater.”