The global scale of the energy crisis and its impact on inflation and prosperity will clearly be the dominant early issues for Liz Truss’ government.
Critics will immediately take sterling’s weakness as a signal as to why their bold pro-growth ideas are premature.
It is useful to consider that not only has the sterling been in freefall, but so has the euro – at a 20-year low – and the Japanese yen – at a 24-year low.
Financially strong business: The City of London generates £200bn annually, exports £121bn when professional services are included and contributes £100bn in tax revenue
The dollar is rising because the Federal Reserve has been more aggressive than its cohorts in raising interest rates and tightening credit conditions.
If people haven’t noticed, the US, along with Saudi Arabia and Russia, is an energy powerhouse, more than self-sufficient in gas and oil.
In fact, it has become an exporter of liquefied natural gas (LNG) to the UK and other friendly countries with the capacity to land it.
Amid the current turmoil, the Truss government must quickly reaffirm its commitment to the city.
When Boris Johnson’s government decided to push through Brexit, it assumed (rightly so, as it turned out) that the UK financial services sector was resilient enough to weather challenges from Paris, Frankfurt and Amsterdam.
As affiliate TheCityUK reminds us, there is still work to be done to implement the Financial Services and Markets Act to increase London’s challenge to New York and the increasingly powerful financial centers of the Pacific.
The city, with its outlandish bonuses, staggering starting salaries and cocaine-fuelled traffickers’ escapades portrayed in the BBC series Industry, will always be viewed with contempt by a wider public.
Yet it generates £200bn a year in output, exports £121bn when professional services are included and contributes £100bn in tax revenue.
It creates jobs well beyond the Square Mile, employing 1.3 million people in financial and professional services.
The Financial Services Act aims to rid the UK of onerous rules inherited from the European Union and make the UK the best place in Europe to list companies.
Labor describes Truss’ plans to scrap the corporation tax hike next year as a “secret tax cut for banks” that will cut their bills to HMRC by 5 per cent.
UK-based banks, including the powerful US and European investment banks headquartered here, have other options when UK taxes become uncompetitive.
A recent survey by PwC found that if the Treasury pushes ahead with corporate tax hikes, the overall tax rate for UK banks would rise to 50.5%, up from 36% in New York, 38.6% in Frankfurt and 37.5% in Amsterdam.
Differences on such a scale would be more than enough to make the projected devastation of the city as a result of Brexit a reality and impoverish the whole country.
None of this means that a culture of unbridled and unfettered capitalism is allowed to smolder in the Square Mile.
But on the contrary. The Financial Conduct Authority’s do-nothing decision against Andy Hornby and other executives who effectively collapsed Halifax Bank of Scotland (HBOS) in 2008, nearly bringing Lloyds Bank to its knees in the process, is one of the most outrageous findings of an official inquiry of our time.
Instead of behaving like the fierce enforcer the City deserves, the FCA have softened in the face of fierce legal opposition.
It snuck an announcement into the black news hole on a Friday night and wasn’t in the good spirits to provide a formal backdrop to its decision.
The Fundamentally Supine Authority is still investigating the collapse of Neil Woodford’s £3billion investment empire in June 2019.
It has done nothing to prevent the rise and fall of Greensill, causing a tsunami of devastation not only here but around the world.
When the FCA’s indifference to the regulation of London Capital & Finance was exposed in a scathing report by Dame Elizabeth Gloster in 2019, the response of former FCA chief executive Andrew Bailey (now Governor of the Bank of England) was to try his hand at it Name and those of other responsible officials removed from report.
The UK needs a low tax and entrepreneurial finance sector.
But the public must be reassured that when there is injustice, justice will be done swiftly and without mercy.
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