December 2024

Earlier this month we welcomed Charlie Conchie, Chief City reporter at City AM to speak to an invited audience.

He told Managing Director Adam Taylor about his new role, the types of stories and people he’d like to speak to, the health of the City of London, and the prospect of a Labour Government and what it means for business.

Thanks to everyone who attended.

To hear more about future events, keep checking our News page or get in touch.

12 December 2023

This is an excerpt from our full-length analysis on the Edinburgh Reforms. To find out more about our in-depth insight get in touch here.

As new City Minister Bim Afolami made his way up to Edinburgh last week to herald the anniversary of the reforms package from late 2022, the Government will no doubt be quietly happy with their progress. Of the 31 measures, we rate around half as green – denoting they are at or nearing completion.

And those that have seen significant progress are not simply the “low-hanging fruit”. The straightforward process of repealing regulations from the EU that are no longer felt to be appropriate – such as ELTIF and PRIIPS – is now in train. But significant new initiatives are also picking up momentum: the UK’s consolidated tape for the bond market alongside a new “Digital Securities Sandbox” are set to go live next year.

But there is still much to be done

Some reforms have been left in limbo following initial consultations, while others are unlikely to conclude fully before electioneering takes centre stage. Most of the reforms are uncontroversial – but that is not universally the case. Opposition to central bank digital currencies is picking up steam, with the Treasury Select Committee echoing their Lords’ equivalent in questioning their purpose. Meanwhile, work on pensions reforms could end up being superseded by the post-election review planned under a possible incoming Labour Government.

A General Election could disrupt reforms

But, as the UK political scene remains turbulent, speculation continues over the date of the next General Election. That decision will filter through to all policy areas.

Any legislation which has not passed into law will drop at the point of dissolution (6 weeks before a General Election). That does leave the risk that even those initiatives that have progressed well end up back at the drawing board for re-consideration under a new Government.

Regardless of which party takes office after the election, there will undoubtedly be delays as (presumably) new Ministers have to re-prioritise their in-trays and take another look at ongoing work to see where they can stamp their authority. Even initiatives with broad political consensus could remain in limbo for many months.

Labour starting to show dividing lines

While Labour has not signalled opposition to the Edinburgh Reforms as a whole, specific initiatives could face challenge or at least re-consideration. Shadow City Minister Tulip Siddiq made intriguing comments to the Financial Times last week, singling out ringfencing reform and changes to the Senior Managers and Certification Regime as areas that Labour may reconsider. Sustainability initiatives are more likely to see their time in the sun under a Labour administration, as the Tories’ interest has cooled.

The regulators are also expected to be relied on more heavily under a Labour Government, which would see regulatory independence as sacrosanct and won’t have the institutional knowledge of recent Ministers.

A lot will rest on the timing of the election. A Labour Government would be unlikely to use up limited parliamentary time unpicking reforms that have completed, but those that remain unlegislated are at risk of delay. If reforms fail to progress now, it could be some time before they come to fruition, if at all.

To speak to Tom about this analysis or any financial policy issue, email tom.harrison@h-advisors.global.

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1 December 2023

Rachel Reeves recently announced a range of financial services and retail banking policies if the Labour Party wins the next General Election, writes Alice Perry, Associate Director – UK Public Affairs.

Rachel Reeves, Jonathan Reynolds and Tulip Siddiq visited a banking hub with LINK and the Cash Action Group today, announcing a plan to open 350 banking hubs in the UK. Banking hubs are shared spaces where communities can access everyday personal and business banking services.

Access to cash has long been a campaign issue for consumer rights groups and is shaping up to be a mainstream political issue, connecting to broader themes of hope vs decline that will frame the debate during the General Election.

At Labour’s 2023 Annual Conference, delegates voted through a detailed policy outlining Labour’s aspirations should they come to power. The document included a commitment to protect vital in-person banking services, guarantee free access to cash and monitor the use and acceptance of cash, while supporting innovation in payment and banking systems. It also included a commitment to work with the Post Office on developing new products and services, such as banking hubs, that will help reinvigorate the high street.

These measures were strongly supported by Labour’s affiliated Trade Unions. The Trade Unions and Labour’s sister party The Co-operative Party regularly run campaigns on access to cash and financial inclusion. This topic is seen as a priority for their members.

I was a member of Labour’s National Policy Forum for over 10 years, the body formally responsible for policy development. Labour’s policy discussions around financial services tend to focus on retail FS and particularly policies connected to access to cash, financial inclusion and consumer protections. These are the issues that are seen as mattering most to voters and the Party’s social justice values. Bank branch closures, “cash machine deserts” and the general decline of the British high street are routinely raised with MPs and local Councillors. (In contrast, voters don’t tend to raise Solvency II or the Wholesale Markets Review with Labour on the doorstep).

The narrative of the decline of the high street came up regularly during canvassing and in public meetings when I was a Councillor and on Labour’s National Executive Committee. People would complain that banks and hardware shops were closing and being replaced with betting shops, payday lenders and boarded-up windows. This is a concern that resonates with voters across the country, and particularly in the so called “left behind” communities that voted to leave the EU. Many of these voters live in constituencies Labour needs to win back in order to secure a majority at the General Election.

Labour (and Reform) will be looking to connect with these voters’ concerns. Labour needs to persuade voters that they can reverse what they call the UK’s path of “managed decline”, regenerating high streets and communities. Labour’s banking hubs plan plays well with the kind of voters they are targeting in these marginal constituencies. It is worth noting that the policy announcement was covered widely in local and regional papers, highlighting what it means for their towns and communities, and giving an opportunity for some of Labour’s prospective parliamentary candidates to raise their profile as the General Election gets ever closer.

To find out more about Labour’s approach to policy development and understanding Keir Starmer’s Labour, please get in touch.

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9 November 2023

This is an excerpt from our full analysis of the King’s Speech. To learn more about the in-depth content our consultants provide for Cicero clients, get in touch at UKPublicAffairs@h-advisors.global.

Running out of time

“What can a country achieve in 52 weeks? Watch this space,” Prime Minister Rishi Sunak’s latest promotional video urges us. So, what will he able be to achieve in this final Parliamentary session, which could last anywhere between six and fifteen months? The package is very light, given limited Parliamentary time and a General Election being required by January 2025. 21 is a typical number of Bills for a legislative session, but five of those are carry-overs and one is in draft form; this relatively insubstantial agenda opens up Sunak’s options for the timing of an election, which still remains up in the air.

The Speech’s principal aim was to create ‘wedge’ issues between the Conservatives and the Labour Party, the latter of which is currently around 20 points ahead in the polls, to turn out the core Tory vote and perhaps secure a bump in the polls. With the Uxbridge by-election still on his mind, the flagship legislation on oil and gas licences announced this week was an enactment of Sunak’s sceptical views towards Net Zero and a method of future-proofing his plans in anticipation of a potential Labour government. However, ahead of the hurdle of a future government comes managing his own party. A vocal minority of “green Tories” will be unhappy with the proposals and, in conjunction with Labour, may be able to destabilise the plans if Sunak is not careful.

There was an unexpectedly large number of Bills on law and order, which can pass Parliament relatively easily, cost little and stir up emotion for those voters who may not otherwise turn out for the Tories. It also draws a line between Labour and the Conservatives on justice issues – we can expect to hear plenty mentions of “lefty lawyers” and Labour leader Sir Keir Starmer’s human rights background in the run-up to the next election. Although Sunak’s team has designed these Bills as traps for Labour to fall into, the focus on making things difficult for the Opposition appears a tacit acceptance that that Conservative hopes of forming the next Government are dwindling.

This Conservative Government, albeit under a different Prime Minister, was elected on the basis of “getting Brexit done”. Now, just four years later, there is barely a mention of the UK’s departure from the European Union, save for legislation ratifying the UK’s accession to the CPTPP. Indeed, it seems an odd choice that Sunak chose instead to talk about the UK’s international “leadership”, including the hosting of the forthcoming summit of the European Political Community – a brainchild of French President Emmanuel Macron.

As expected before a General Election, there were some retail offers, like the creation of an independent football regulator and a ban on unlicensed pedicabs. However, compare this to the last Queen’s Speech before a scheduled General Election: in 2014, David Cameron’s Government offered pension overhaul, childcare subsidies and a Bill giving voters the power to recall their MPs. Wary of his delicate position in his party, Sunak has avoided any legislation that will be majorly controversial on the Government benches – for example, on banning conversion therapy or building more homes.

Sunak has previously been accused of a lack of political vision, and a scarcity of retail policies to appeal to new (particularly younger) voters has shone a light on this issue. It is revealing that the King’s Speech declined to tackle some of the major questions facing the UK right now, like how to tackle the housing crisis and solve the UK’s massive childcare issues, instead leaving a future Government (likely of a different colour) to decide the UK’s direction.

To read more insights like this get in touch or sign-up to our UK Public Affairs newsletter here.

6 November 2023

The next General Election could be over a year away, but the main political parties are already in campaign mode.

It is notable how the City’s perceptions of Keir Starmer’s party have shifted, with the focus now on Labour’s plans for Government and what role the City could play in delivering Labour’s vision.

Labour faces a challenge. It has a legacy of 13 years of sometimes contradictory policy ideas that all wings of the party have been pushing the leadership to adopt. The National Policy Forum final document is over 110 pages, outlining an ambitious agenda with more priorities than any government could deliver in one term. If Labour does win, they may not have the luxury of a sizable, or any, majority, so the crucial question would be: what do they prioritise?

The approach to financial services has a clear focus on consumer protection. Regulating buy-now-pay-later schemes is cited. Although the party’s views on crypto have softened, shadow cabinet ministers have referred to the crypto market as a “Ponzi scheme” and the party has not joined the Government in talking about making the UK a “global cryptoasset hub”.

The policies show enduring support for productive finance. With both parties seeking to jolt the UK out of its sluggish growth, Labour sees business investment as a key solution. Shadow Business Secretary Jonathan Reynolds has lauded the Solvency UK reforms as a “benefit of Brexit”. Labour has focused on incentivising pension fund investment into the real economy. Initiatives such as encouraging DC pensions to invest in tech start-ups – Long-term Investment For Technology and Science (LIFTS) – may well continue.

Labour sees the financial sector as crucial to the net zero transition. The party’s push for an uptick in covered green bonds, under their Green Prosperity Plan, is a response to Biden’s Inflation Reduction Act. The lack of fiscal headroom for mass subsidies or tax exemptions increases Labour’s reliance on the financial sector for the success of the net zero transition. Their commitment to embed ESG in firms’ regulatory requirements is a sign that Labour will take a different approach to the Government, who have deliberately slow-pedalled initiatives like the Green Taxonomy and Sustainability Disclosure Requirements.

Much of what will define the party’s relationship with the City will be what – for now – remains unsaid. Labour’s revenue-raising proposals are currently limited to a windfall tax on oil and gas companies and ending tax breaks for private equity, non-doms and private schools. But Labour may be forced to change tack. Last February, Starmer tabled an amendment to the Finance Bill to cancel the reduction in the banking surcharge, which would have seen banks pay taxes of over 30 per cent on their profits. Labour insists that they won’t raise taxes on the sector, but they will face pressure to do so from campaign groups and activists. This issue of taxation will be a litmus test for Labour’s support for financial services.

The Government’s reforms to the post-2009 settlement, particularly those that are seen as injecting risk back into the financial system (like the ringfencing reforms or the proposed new-look short selling regime) could be unpicked by a Labour Party uneasy at overruling regulators. With a Treasury led by Rachel Reeves, a former regulatory policymaker, Labour may defer more often to the Bank of England and FCA.

The success of the City over the coming years may well rest with a new top team that sees the financial services as a key enabler of their policies.

Get in touch with us to talk about Labour’s approach to financial services or Labour engagement strategies or sign-up to our UK Public Affairs newsletter here.

This article was originally published in City AM.

20 October 2023

Overnight the Conservatives suffered defeat in two by-elections at the hands of Labour in Tamworth and Mid Bedfordshire, overturning large Tory majorities in an unprecedented night in British politics. The results further reinforce Labour’s dominant position in the polls and mark an impressive few weeks for Keir Starmer, the Labour leader, who also led his party to success in the Rutherglen and Hamilton West by-election two weeks ago.

For the Conservatives, these historic results are prompting conversation on whether Rishi Sunak’s approach is the right one, given his net zero pivot and his party conference speech seemed to have had little impact. Two successive losses could hasten Rishi Sunak’s reset in advance of the State Opening of Parliament and Autumn Statement next month.

Despite a good dollop of expectation management, it was a crushing night for the Conservatives, who suffered their worst by-election night in history. The Labour Party overturned the largest majority in raw number of votes in Mid Bedfordshire and achieved their second biggest-ever swing against the Conservatives in Tamworth.

On the other hand, in both by-elections, turnout was markedly down, which isn’t uncommon in mid-Parliament polls, although it does reinforce the view that neither party is doing enough to drag its own voters to the polls. This could benefit the Conservatives at a general election, seeing as  should traditional Tory voters decide to cast a ballot at all they are likely to stick with the party of government. Expect more rumblings from Tory backbenchers calling for tax cuts to motivate their base to turn out at the polls in the weeks and months ahead.

The success of Reform in Tamworth is also worth noting, with the Tories potentially suffering a pincer movement from both left and right in those Leave-voting seats in the North and the Midlands, although they could yet be squeezed during the course of a five-week general election campaign.

What lessons can we learn from these elections?

We should never try and extrapolate too much from individual election results, especially while we’re still probably 12 months out of an election. On the other hand, the respected psephologist Professor Sir John Curtice noted that “there are no silver linings” for the Tories, unlike in the summer when the party unexpectedly held on to Boris Johnson’s old seat of Uxbridge and South Ruislip. Additionally, with Labour increasing its share of the vote despite a strong challenge by the Liberal Democrats in Mid Bedfordshire suggests they are not simply riding the protest vote wave, but are capturing switchers that they will need to hold on to in order to take the keys of Number 10 off Rishi Sunak.

As ever, the West Midlands will be a key battleground for the next election. It is too simplistic to say so goes the West Midlands so does the country, but a region that handed the majority of its seats to Labour in 1997 and backed Brexit in 2016 underscores the constantly changing shift in political dynamics in the region. In Tamworth, the Conservatives were all but wiped out in the local elections this year and have now lost the area’s Parliamentary seat. The result leaves the Government needing a significant recovery in the polls, not just to prohibit the now likely Labour majority in the next General Election, but to recover to respectability and avoid a result that could be the worst Conservative Party performance of the post-war era.

For the Labour Party, the last three weeks could hardly have gone any better. First the win in Rutherglen reaffirmed the party’s belief they are making a comeback in Scotland and now two wins in England are edging the party ever close to power. The only thing now will be to maintain the momentum, not get carried away and be prepared to respond to a potential policy shift by the Conservatives.

For our full analysis on Labour’s Conference, its policy proposals and what they mean for business, get in touch.