Lord Mayor speech at the New Economic Forum, Madrid, Spain - 7 March
New Economic Forum Breakfast Speech
Madrid, Spain, Wednesday 7 March 2018
Good morning everyone, it really is a pleasure for me to be with you today.
This is the final part of my trip to Portugal and Spain and, although I have only spent two days in Madrid, it reminds me of the years I spent working almost four hundred miles away in Barcelona.
It’s also good to have an excuse to use my fluent Spanish. It’s been a while since I’ve used it, so if you notice any errors in pronunciation: I apologise.
Of course, there are some things that don’t necessarily translate from Spanish to English. The wonderful word ‘Sobremesa’ for example – it is one word for you, and a whole phrase for us, but it is something that we all regularly experience. In English, the closest you get is “time spent after a meal with family or friends, talking and enjoying each other's company”.
In fact, it’s something I have experienced a lot over the last three days whether at lunch in the British Chamber of Commerce or over dinner at the Ambassador’s residence. This ‘sobremesa’ has given me the opportunity to explain something else that is difficult to translate and that is the position of the Lord Mayor and the City of London Corporation.
So, let me offer this explanation. I am the 690th Lord Mayor of the City of London, which is a Square Mile that sits just north of the River Thames.
As the Lord Mayor, I am the principal ambassador and key spokesperson for the UK’s financial and professional services sector, which has had its historic links in the City, but today that sector is spread throughout every major city in the UK – Birmingham, Bristol, Edinburgh, Glasgow, Leeds and Manchester – they all have over thirty thousand people employed in this sector.
It is a sector that employs 2.2million people nationwide, it accounts for 12.5% of our GDP and it is a huge contributor to tax – the financial sector alone returns over £72billion in tax every year. I am also a representative of the City of London Corporation, the world's oldest continuously-elected local government authority. They support the financial and professional services sector, and I work alongside them to emphasize what the City offers: safety, stability, regulation, philanthropy and world-leading products and services.
UK/Spain financial and professional services
Today, I want to talk to you about this sector, what my priorities are, how we will navigate through Brexit and how Spain and the UK will continue to have a productive relationship. The link between the Brits and the Spanish has always been strong. A clutch of Royal marriages over the centuries. We are the two most inter-connected cities in the world.
We live and retire in each other’s countries, with our census data showing Spanish migration to the UK increased by 85% in 2011 and nearly 400,000 people from the UK live across Spain. Britain is home to around 5,000 Spanish scientists, and the number of children wanting to learn Spanish in our schools has more than doubled. But perhaps our strongest link is trade – our annual bilateral trade is about £58billion euros. The UK is the principal destination for Spanish overseas investment with over 900 UK companies operating in Spain, including Intu, Bupa and Vodafone and over 400 Spanish companies are registered in the UK.
We trade automotive supplies, we trade aircraft motors and blades, and we trade life-saving medical and pharmaceutical products. But some of the strongest Spanish trade links are in our financial sector. Spain is the largest EU investor in UK financial services, with a stock of £15.9billion invested in the UK in 2016. And some of Spain’s household names in the UK are in the financial sector. I am talking, of course, about Santander.
First coming to the UK to buy Abbey in 2004, a company with over 60 years of history, helping families save after the Second World War, it then took on Bradford & Bingley’s saving business in 2010 and brought a new, revitalised bank to the high street and it is a great investor in place and people, with over 24,000 employees, 14million active customers and over 1,000 branches nationwide. And you can see their name everywhere in London as tourists cycle on the London bikes or – as they’re more commonly known – the Santander cycles.
Bianco Sabadell, too, has been a part of the UK finance industry for over 30 years. It took over TSB just a few years ago and it is a joy to see this Spanish expertise in the UK market.
Of course, the City is no stranger to Spanish expertise. Nearly 2,000 Spanish people work within the City’s Square Mile and we were incredibly fortunate to host the Spanish business forum at Mansion House last June during the State Visit, where the Spanish Trade Minister and His Majesty the King of Spain spoke. I consider that visit a great privilege, and it symbolises just how important our relationships is for our future prosperities. Emphasizing that bond has never been more important, as we continue with Brexit.
I am sure it hasn’t escaped you that many members of the UK Cabinet have been making speeches outlining their current position on Brexit - they have called it their ‘Road to Brexit’ series. And I believe it is worth considering how it is we ended up driving along this road in the first place.
Brexit and the City
The UK made the momentous choice almost two years ago. There were numerous causes - immigration, sovereignty, the rising sense of globalism and not enough support at local level. Many people talk of holding a second referendum, or reversing the decision. I think such talk is wasted breath. I believe it’s a priority for the City to secure the best possible Brexit deal, helping to preserve and enhance economic prosperity both in the UK and Europe. Right now, there are two important questions being played out in public and in private, in London and in Brussels.
The first is: What kind of relationship does the UK want with the EU?
The second: What kind of relationship does the EU want with the UK?
And as both sides try to answer these questions, businesses across our continent must make sure their voices are heard in these discussions. Of course, as a representative for the City of London, the world’s greatest financial centre, I know what a unique position the financial services operate under. Europe works closely with us – we’re home to over two hundred and fifty foreign banks, nearly eighty per cent of foreign exchange trading and thirty per cent of all bank lending in the EU flows through the UK. And we work closely with Europe – new research published just last month showed that almost a fifth of the Square Mile’s workforce derived from the European Economic Area in 2016.
EU Free Trade Agreement including financial services
The UK is heavily integrated into the EU’s financial service markets. We offer the largest market for cross-border bank lending, issuing debt and trading foreign exchange. All of this increases choice and reduces cost for firms looking to raise finance and manage risk. European businesses, public bodies and private citizens benefit from having access to the UK financial services industry and, via the UK, to the global financial system. That is why a bespoke deal covering financial services is of vital importance if we want to maintain not only our position as a world-leader, but also the relationships we have built over many years. Given the depth of integration between the City and the European economy, no existing model is adequate.
Only last week I hosted the Prime Minister for her latest set piece Brexit speech. Attended by members of her Cabinet, senior business leaders and EU ambassadors, I was delighted that this speech was delivered at my office and residence in the heart of the Square Mile. This was a major speech and I spent a lot of time with her on Friday discussing a wide range of issues. I welcome her ambition to deliver an ambitious free trade agreement
And I – and the Corporation – look forward to securing a deal on transition as soon as possible. Like many other industries – as the International Regulatory Strategy Group have outlined – the financial and professional services have a few ideas what that agreement could look like for that sector - mutual access, regulatory alignment, supervisory co-operation, and dispute resolution. Crucially, these proposals do not cross any key criteria set out by the UK or the EU. The legal order and sovereignty of each would be fully protected and the level of regulatory protection would be the same in each jurisdiction. I believe that this model, though ambitious, is achievable.
It would represent a true win-win for Europe. Maintaining a default position of regulatory alignment, to underpin mutual market access, will give us so much: The freedom to maintain the strength of London as Europe’s global financial hub. The ability to continue setting strong global standards. And the chance to move through Brexit, causing the least amount of disruption for people and businesses across the UK and the EU.
Getting this right is of the utmost importance. I have said throughout my speech that the UK is a unique place when it comes to financial and professional services, where exports are at a record high. But it is worth thinking what is it that drives those exports, what it is that makes people across the world want to work with our great services. And I believe I have an answer: creative energy.
It encompasses the best of what London offers. And that creative energy is built on the fundamentals of: rule of law, culture, history, education, talent, regulation, tax, innovation, infrastructure, time zone, language, security, probity and a great place to live and to work. Creative energy is found in every profession, place and person in the City. And London continues to evolve, to become even greater. We work hard to be at the forefront of new innovations like fintech, cyber and green finance. And we continue to build markets across the world, including Asia and Latin America
And as the Lord Mayor, I spend 100 days abroad, visiting some 29 countries advocating for the world leading financial and professional services sector. I remind everyone I meet about that creative energy, that – with over 1000 years of history – these foundations are difficult to replicate elsewhere. If they could, they would. But London is world-class, a collection of great qualities not easily replicable. Our time zone, our language, our rule of law, our rigorous regulatory system, our skills base
All these will endure whatever the outcome of the Brexit negotiations. London got where it is today by a commitment to high regulatory standards. In all my meetings with officials, politicians, policy experts, I have seen no appetite to slash regulation after Brexit. This would be a bad outcome for the UK, for Europe and for the world. Instead, we need to look for the win-win outcome.
One where London can continue to be a European asset, driving economic activity right across the Continent. Such an outcome is in the mutual interests of business in the UK and the EU27, and can be achieved while respecting the legal order of the EU. Doing so will require imagination. It will require great drive and persistence. Simply put: it will take a lot of hard work. But we’re up for the challenge. I’m up for the challenge. I believe that if business makes clear its preference for this kind of pragmatic outcome for the public good, our politicians will find a way to deliver it.
It is incumbent on us to make things even better than they have done before. Which brings me to my final point: how do we ensure that this rich heritage continues?
It is all built on one word: trust. When people do business with the UK, that is a position of trust: they trust us to work our hardest to provide them the very best possible service. But we must continue to invest further in trust. The 2017 and 2018 Edelman ‘trust barometer’ reported a significant drop of trust in institutions.
And, importantly, nearly seven in ten respondents said that building trust is the number one job for CEOs, ahead of high-quality products and services. To put it another way: you could be offering the very best new fintech device for your smart phone or you could be helping people save through a new ISA account, you could be selling anything, but the commodity that we are all selling is ‘trust’. The message I will repeat many, many times this year is this:
If London is to remain the global hub for financial and professional services, then at a national level we have a responsibility to re-earn the trust of the society we serve. And, internationally, we must demonstrate that London continues to invest in being the trusted cluster of choice. I have been taking our Business of Trust programme to everything I do, and everywhere I go, and I am delighted to share that message with you. No more so, than in my recent visit to Australia and New Zealand last week. During my time down-under I conducted four trust interviews – one with Shayne Elliot, CEO of ANZ Bank, another with Luke Sayers, CEO of PwC Australia, and two with the Rugby greats, former All-Black, Sir John Kirwan and Todd Greenberg, CEO of Australia’s National Rugby League.
Ladies and Gentlemen, it has been a great pleasure to be with you here this morning. Visiting so many places during my time as Lord Mayor is a great privilege, especially in a country where I have such strong personal connections. I am honoured, excited, energised and motivated to be undertaking this role. And I look forward to working ever closer with Spain to make sure our great trading relationship and friendship continues for centuries to come. Thank you for listening.