Annual Investment Association Dinner: Speech by the Chancellor of the Exchequer
Speech by Chancellor of the Exchequer, Philip Hammond MP, at the annual Investment Association dinner.
My Lord Mayor, Ladies, and Gentlemen.
As ever it鈥檚 a pleasure to be here tonight.
I realise I am underdressed as usual 鈥� I got used to it at MOD.
A friend of mine鈥檚 a fund manager and I asked him his advice to make 拢100,000 on the stock market. He said 鈥渟tart with 拢200,000鈥�.
That鈥檚 the problem with investment management jokes 鈥� investment managers don鈥檛 find them funny, and the rest don鈥檛 think they鈥檙e jokes.
When you stop and think about it - there are certain similarities between being Chancellor and an investment manager.
Both tasked with managing large amounts of other people鈥檚 money, and invariably promising things that you may struggle to deliver.
Questionable whether voters or investors have shorter time horizons and less patience.
Two weeks ago I was in Birmingham for the Conservative Party Conference鈥�
鈥nd last weekend I was in Bali for the IMF meetings.
Now I know what you鈥檙e thinking鈥�
鈥hese places are quite different and have little in common鈥�
鈥nd you鈥檇 be right - the beaches of Bali have nothing on the canals of Birmingham.
In both places however, the theme was the extraordinary change the world is going through.
In politics, in economics, in technology 鈥� I heard from people experiencing this change in their jobs and everyday lives in Birmingham鈥�
鈥rom the world鈥檚 finance ministers gathering in Bali鈥�
鈥nd here tonight amongst businesses and investors in London.
And this shouldn鈥檛 be surprising鈥�
鈥ecause we are living through the early phases of a Fourth Industrial Revolution鈥�
鈥hich is affecting all of us鈥�
鈥he world is being transformed through new opportunities from breakthrough technologies in everything from medicine, to AI, and robotics.
We face new challenges too, from upskilling the next generation - to demographic pressures we鈥檙e facing鈥�
鈥hich on current trends suggests that by the end of the next Parliament more than half the population will consist of royal babies.
In the coming years the speed and scale of the technological revolution will only grow.
And if the UK is going to keep up 鈥� and if we are going to continue to grow, create jobs, and raise the living standards of our people 鈥� our economy will need to continually adapt and to remain competitive.
And in no sector is this more important than our financial services sector鈥�
鈥he success which is somewhat of a bellwether for the success of our economy:
Employing over 1 million people 鈥� 2/3 of whom are outside London;
Making up 28% of our services exports;
And lending half a trillion pounds to UK businesses.
皇冠体育app pace of technological change in our financial services industry has already been extraordinary:
A decade ago only a 1/3 of us used online banking鈥�
鈥oday it is 2/3鈥�
鈥ith 160 of us logging on to our banking apps every second鈥�
鈥nd contactless payments growing an astonishing 115% in 12 months alone.
Asset Management
And tonight, we are here, of course, at your second annual dinner, to celebrate a critical part of this sector鈥�
鈥ur world leading investment management industry.
And before I let you get on with your dinner鈥�
鈥 want to say a few words about how we in Government and you in industry can navigate the challenges and opportunities ahead鈥�
鈥o ensure that post-Brexit, Britain continues to be a world leader in investment management.
Why is this important to me?
It isn鈥檛 just because the sector employs 100,000 people up and down the country鈥�
鈥nd nor even because it contributes over 拢5bn of tax revenue every year鈥�
鈥ut because - through your workplace pension and other means - 75% of British households benefit from the services of an asset manager鈥�
鈥lthough most don鈥檛 realize it鈥�
鈥nd because you invest billions of pounds in technology, businesses, and infrastructure鈥�
鈥eeping our country growing, moving, and innovating鈥�
鈥nd acting as a magnet for other high-value added sectors, such as investment banking, to cluster around it.
So as Chancellor 鈥� it is an absolute priority of mine that through the Brexit negotiations, and the technological change to come, this sector continues to be world leading.
And the evidence suggests we鈥檙e not doing too badly:
皇冠体育app UK is the largest investment management centre in Europe 鈥� and the second largest world-wide鈥�
鈥t grew an astonishing 12% last year 鈥� to 拢9.1 trillion assets under management鈥�
鈥β�7.7 trillion of which are managed by companies represented in this room tonight鈥�
鈥hich means if you鈥檙e feeling generous you could pay off the national debt four times over tonight.
And my message to the room is this:
We are one of the great investment management centres in the world鈥�
鈥e have been for centuries鈥�
鈥nd we face this moment of change from a position of great strength:
Our language is the global language of business;
Our legal system the jurisdiction of choice for commerce;
Our world-class universities and schools contribute to the pluriculture that makes the UK such a favoured place to live and work and grow a business;
Our tech sector is the innovation leader in Europe;
And we are the global capital for international finance and professional services;
皇冠体育app place you come to access leaders in banking; insurance; law; accountancy; consulting; and, of course, investment management.
But the key point is that Britain鈥檚 strength is more than the mere aggregation of these things鈥�
鈥t is the symbiotic effect of bringing together the world鈥檚 leading financial centre, a global innovation hub, research centres of excellence, a global leader in creative industries, and a vibrant and diverse culture鈥�
鈥ll of which builds an ecosystem of prosperity.
Brexit
And of course - the immediate key to maintaining this ecosystem 鈥� is ensuring we get a good Brexit deal 鈥� and protecting markets from uncertainty during transition.
And let me be clear:
This Government is 100% committed to getting a Brexit deal that protects jobs, growth, and investment鈥�
鈥nd we are resolute in securing a deal that allows services, and especially financial services to flourish and grow.
We have set out in our Future Partnership White Paper our proposal on our future financial services relationship with the EU.
And what we have proposed is logical:
A framework that allows the benefits of UK-EU financial services trade to continue 鈥� and maintains open markets, and deep regulatory cooperation.
Under our plan we would build upon the EU鈥檚 existing 鈥榚quivalence鈥� regimes鈥�
鈥ut expand their scope to recognise business activities that are in the interest of both the EU and the UK鈥�
鈥ut not currently covered by the existing regime.
This framework would be grounded in a legally-binding bilateral agreement governing process, with institutional arrangements for regulation and supervision to provide long-term certainty for firms and investors.
Of course - we recognise that this will be a new kind of relationship 鈥� reflecting a new balance of rights and responsibilities鈥�
鈥ith decisions relating to access and to our respective markets being decided individually by both sides鈥�
鈥ut within a clear bilateral framework of process that ensures the arrangement is commercially viable 鈥� for example through appropriate notice periods for any changes.
皇冠体育appre is no reason at all why this new kind of relationship cannot support deep levels of trade and interconnectivity鈥�.
鈥ven though we will be outside of the EU, the Single Market and Customs Union.
This is surely in the interests of all of our consumers and businesses?
I can tell the room tonight that we have had good working level discussions with the European Commission on our proposals鈥�
鈥nd negotiators have found plenty of common ground - so I hope, and expect, that logic and pragmatism will prevail鈥�
鈥nd that we will reach agreement on a future framework that preserves jobs and protects investment on both sides of the channel.
I know for people in this room tonight there is a specific and important question over the regulatory cooperation agreements that underpin portfolio delegation.
I am clear: these delegation arrangements are critical to the investment management sector.
And the direction of travel globally 鈥� in this case, strongly supported by the US 鈥� is to liberalise.
Investment Management is incredibly important to the UK鈥檚 financial services ecosystem鈥�
鈥ut these services are also just as important for the EU - portfolio delegation allows the UK investment management industry to run 35% of the assets under management in the EU 鈥� more than twice as much as any other member state.
So - as we made clear in the Technical Notices we published over the Summer鈥�
鈥e expect these arrangements to continue鈥�
鈥his model is the global norm, and there is no reason why it should not continue to be so.
皇冠体育app FCA stands ready to agrees these MoUs鈥�
鈥 was pleased to hear the Chairman of ESMA say he plans on having these agreements in place well before March鈥�
鈥nd the Chairman of the French Market Authority say he has 鈥渁bsolute conviction鈥� that they will be agreed before we leave the EU.
I share his view.
We will continue as now during the implementation period鈥�
鈥ith no discrimination possible under EU law鈥�
鈥nd we will then reach agreement as part of the Future Economic Partnership to allow this business to continue to our mutual advantage.
Investment Management Strategy
Other than the small matter of the Budget in just under two weeks - Brexit is, and must remain, my most immediate priority as Chancellor.
But I am also focused on what next.
How Britain remains the global powerhouse for financial services that it is today, through Brexit and through the technological change and that is to come.
And how the financial services industry 鈥� and investment management in particular - can support the investment our economy needs in the infrastructure and technology of the future.
At my last Budget I launched our Patient Capital Review 鈥� a 10 year action plan to unlock over 拢20 billion of long-term finance for high-growth innovative firms鈥�
鈥nd since then we have put 拢2.5 billion into the launch of British Patient Capital; we鈥檝e expanded and re-focused the tax reliefs available for Venture Capital Trusts and Enterprise Investment Scheme鈥�
鈥�.and we鈥檝e worked with the investment management sector to explore how we can unlock pensions investment in patient capital鈥�
鈥nd specifically the untapped firepower of defined contribution pension schemes which we expect to hold over 拢1 trillion of assets by 2025鈥�
鈥nd at my Budget in a couple of weeks I will say more about how we can ensure DC pension funds are able to make long-term investment decisions, for the benefit of both their members, and the wider UK economy.
I also want to ensure that our investment management sector continues to be at the cutting edge of global markets in the face of rapid technological, economic, and societal change.
Last Budget I launched our Second Investment Management Strategy鈥�
鈥nd I鈥檇 like to thank the Economic Secretary, John Glen, and Chris Cummings , and other members of the Asset Management Taskforce for driving forward this work with pace. We said we needed to harness the UK鈥檚 world-leading Fintech sector to support the asset management industry鈥�
鈥nd I was delighted that last week the Investment Association launched its own Fintech Accelerator - Velocity鈥�
鈥hat will take the best ideas in the market and ensure they get the support and investment they need to scale up and succeed.
We said we needed to reach out to markets around the world and strengthen the UK鈥檚 links to investors and asset managers鈥�
鈥ecause if we are to achieve a truly Global Britain then we need to look to strengthening ties with the big, established markets, such as the US and Japan鈥�
鈥nd the fast-growing markets of the East 鈥� in India and China鈥�
鈥ho 鈥� as their middle classes grow in size and prosperity 鈥� will rapidly increase their demand for asset management.
And I announced at my Mansion House speech in June a new strategy for our global engagement on financial services鈥�
鈥eeking to build a series of new Global Financial Partnerships with key markets鈥�
鈥everaging existing tools 鈥� such as our bilateral dialogues and regulatory cooperation鈥�
鈥ith new tools 鈥� such as the UK鈥檚 future equivalence regime and Free Trade Agreements鈥�
鈥hich for the investment management sector means better access to markets around the world, lower costs of cross-border fund sales, and a bigger role for London as a global hub for asset management.
And we said we needed UK asset managers to be global leaders in the financial markets of the future鈥�
鈥nd I am therefore pleased that during Green Great Britain Week I can announce that the Government will launch a Strategy on Green Finance next year鈥�
..building on the Green Finance Institute that I announced at Mansion House鈥�
鈥nd for those of you up early, the Economic Secretary will say more about this at the market opening of the LSE tomorrow morning.
Conclusion
I won鈥檛 delay you from your dinner much longer鈥�
鈥ut I do want to finish with a story I heard the other day.
A fund manager and a priest die and go to heaven.
皇冠体育app fund manager is greeted by St Peter and is given a beautiful apartment, with champagne fountains and glorious views across all of heaven.
皇冠体育app priest is greeted by St Peter and shown to his tiny inner room, with a small window overlooking a dusty courtyard and overflowing dustbins.
皇冠体育app priest complained to St Peter, 鈥淚 don鈥檛 understand, I鈥檝e led a blameless life, in service to God, and this guy has spent his whole life in the service of money. How is this fair?鈥�.
St Peter replied, 鈥渓ook I know that 鈥� but we鈥檝e got thousands of Priests in heaven, and he鈥檚 our first fund manager鈥�.
On that note, I鈥檒l wrap up.
Britain is, and will remain, a great place to do business.
We are a global capital for financial services, investment management, and we鈥檙e leading the world on developing Fourth Industrial Revolution technologies鈥�
鈥nd as Chancellor I am absolutely determined to go on pushing us to do even better.
Chris 鈥� I think you got it right in your recent FT interview when you described yourself as 鈥渁 tenacious bugger鈥濃��
鈥ell I am too.
I have spent the last two years on a path of unswerving commitment to a Brexit deal that protects jobs, investment, and growth;
To investing in the technologies and skills of the future;
And to working with all of you in this room to ensure that Britain remains the best place in the world for finance and investment management.
I remain committed to that cause鈥�
鈥nd I am convinced that we will succeed in delivering those goals for Britain.
Thank you.