Why isn’t UK financial services getting the credit it deserves?

In this episode of One Bold Question, Martina Keane and Bob Wigley, Chair of UK Finance, explore why UK financial services deserves greater recognition and what could unlock future growth.

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Martina Keane, EY UK & Ireland Financial Services Leader, and Bob Wigley, Chair of UK Finance, discuss the vital role the financial services industry plays in the UK economy and how investment and innovation can help drive its future growth and competitiveness.

Covering UK financial services regulation, investment, AI and new technologies, they explore how the UK can remain internationally competitive, unlock growth nationwide and create the conditions for businesses and customers to thrive. Martina and Bob also discuss how industry leaders can make a stronger case for the sector's economic contribution and the millions of people and businesses it supports every day.

Key takeaways:

The right financial services regulation, policy and investment environment will be critical to unlocking growth and strengthening the UK’s position as a leading global financial centre.
AI and digital assets, including tokenisation, offer significant opportunities for UK financial services to innovate, develop new capabilities and strengthen its future competitiveness.
Regional financial services centres are a key competitive advantage, helping to attract international investment, develop talent and drive growth across the UK.
Industry leaders have an important role to play in collectively championing the UK financial services sector’s strengths and communicating its contribution to the UK economy.

00:00:00.000 — 00:00:07.560 · Martina Keane

The most successful firms would be those that are not afraid to move forward with decisions and get on with it in uncertain times, because these times are not going away.

00:00:07.600 — 00:00:13.000 · Bob Wigley

Be bold. Be confident. Be factual. And then be smart about how we work with other countries.

00:00:13.040 — 00:00:48.800 · Keane

Welcome to One Bold Question, EY’s video podcast exploring what becomes possible in financial services when we challenge conventional thinking. I'm Martina Keane, EY, UK and Ireland financial services leader and your host. UK Financial Services is an economic engine room of the nation, powering business, employment and the financial well-being of millions.
So why does our sector often struggle to get the credit it deserves? Here to help me answer these questions is Bob Wigley, who built his financial career at Morgan Grenfell and Merrill Lynch and is now chair of UK finance. Welcome, Bob.

00:00:48.800 — 00:00:49.800 · Wigley

Thank you for having me.

00:00:49.840 — 00:01:23.220 · Keane

So Financial services is the engine room for the for the UK economy one tenth of economic GDP. We have over 2 million employed across the financial services industry, a hub for talent, innovation and investment globally. Even beyond economic direct contributor to the to the economy is the infrastructure for households, for businesses and for capital and deployment into innovation.

So can you just take me through your view on the on the growth in the sector over the last number of years?

00:01:23.260 — 00:01:59.820 · Wigley

Sure. Well, um, so the short answer to your first question is the contribution of the sector to the economy is enormous. It's one of our few world class industries. It is growing. And it is, as you said, the engine room. It's the sector which facilitates all other sectors. You cannot have a prosperous economy or indeed a successful government, in my view, without a well-functioning and prosperous financial services sector.

Let me just rattle through a few facts. So you mentioned it's roughly 11% of GDP. That's about 290 billion per annum. Um, it's 1.1 million jobs directly, about 2 million if you include professional services.

00:01:59.340 — · Keane

Of course

00:01:59.820 — 00:02:22.390 · Wigley

With financial services or for financial services. The interesting fact there is, while most people think it's London centric, over 60% of those jobs are outside London, which I think is very significant. It's a national industry. Whatever statistic you look at, this is a highly significant sector of the economy and a very important one for the future.
And your own attractiveness survey looked at the UK last year as a

00:02:23.470 — 00:03:35.490 · Wigley

sort of in a benchmarking review of where financial investors are putting their money globally, and investment into the UK rose by 16% last year, according to your survey. So this is a sector that's doing well and it remains globally attractive. It's a growth enabler. You said, you know, engine room of the economy.

Well, you know the family that wants to buy its first home or buy its first car or the SME that wants to set up and needs that first loan capital to expand its business, the middle sized business that's looking to build a second factory. All of these things are facilitated by the financial services sector. Then if you look at the machinery of the economy, what underpins the way the economy works?

We processed 50 billion payments last year, and we help businesses raise 600 billion of capital to invest in the UK. And then if you look at M&A analysis, mergers and acquisitions, there was a big surge actually in 26. That's forecast to continue. A 25% increase in M&A in financial services. So I rattle off a few statistics.

But wherever you look you know financial services is doing is doing well. It is growing. But fundamentally it's the thing that underlines the potential for the UK economy on a wider basis.

00:03:35.570 — 00:04:41.670 · Keane

Yeah. And Bob, you mentioned so many strong facts there. You can see why the government has it in the eight industries that they are given priority to. And I think this is really, really timely. If you look at last year it released the ten year plan, the the competitiveness strategy. And when you look at all of this, but then you look what's happening in the US right.

And the US, New York in particular is definitely competition is intensifying I would say for. For the UK. Yeah. You got Singapore. You got France as well behind it. Um, but then you look to there's a lot of positives in the UK. There's our talent. We talked about it is it is an innovation hub. Um, it's very, very strong on FinTech you know emerging and emerging tech. Right. But it definitely comes if you look at this competition intensifying, it's very, very hard not to talk about regulation. Right. If you talk to any anybody in the marketplace, regulation is coming up time and time again. Again. So let's just if we look to policymakers and regulators, what do we what do you think they can be doing more of to maximise the growth of our sector.

00:04:41.750 — 00:04:44.630 · Wigley

That is literally UK Finance’s specialist subject.

00:04:44.630 — 00:04:47.070 · Keane

I knew you'd like this question.

00:04:47.110 — 00:07:00.760 · Wigley

Yeah. So when the chancellor Rachel Reeves, the then chancellor, wrote to the regulators and uh, reminded them of their new competitiveness objective and said write back to me and tell me how you can amend regulation to better support growth. We read the initial replies, which to be honest I thought were a little unimaginative and so we thought we could do better.

So basically, I challenged the team at UK finance to come up with our own suggestions, as if we were each of the regulators. What would we do to roll back regulation now? The first thing to say, this isn't some sort of great, um, race to the bottom. This is not some massive rollback of regulation. What we're saying here is we've now got the ability post-Brexit to make some changes.

Let's look across each type of regulation and say what marginal, incremental, sensible changes can we make that would better support growth, that would free up capital to lend to the real economy, but do not challenge the safety and soundness of the financial system? And the answer to that was a lot. So we came up with about having consulted our members.

We came up with about 40 points, put them into a plan for growth under two key objectives. How can we better support growth and how can we better promote financial inclusion in the economy. And we put that to the government. And cut a long story short. The suggestions were well received. We've been working with the government closely ever since then to implement many of the points.

I would say roughly two thirds are in flight to varying degrees. The 40 points were largely around conduct, regulation and the big opportunity, I think, for this year and next year is capital. So we would argue that post the global financial crisis, when you add up all the measures that were brought in, we ended up with a regulatory regime for the amount of capital that's required to be held by banks.

That was that was a little over restrictive. That was not globally competitive, and that we can make changes again at the margin, which somewhat reduce the amount of capital required to be held by banks, but don't affect safety and soundness in our view. So deep discussions going on with the PRA on how we can improve the international competitiveness of our capital regime.

That's the big. The big opportunity for this year.

00:07:00.800 — 00:07:39.880 · Keane

So we talked about regulation right. And it is important that we're very we have a very strong regulatory system which is important from a trust perspective. Resilience and so forth. Right. But also when you look to policymakers and regulators, it's important as well that we have regulation that is pro-growth, right.

And why is that? We talked about the US. We're competition is intensifying particularly from innovations and digital assets emerging tech. Just staying on that for a moment right on emerging technologies, AI, all of that how we need to stimulate innovation apart from regulation. Bob, where else what else do you think we need to do?

00:07:39.920 — 00:08:06.980 · Wigley

Let's just talk about AI for a minute. So contrary to what some people would have you believe, I mean, the UK is actually doing quite well in AI. I mean, we're a smaller country than the biggest ones who are specialists in this area, but we're punching above our weight. Uh, you know, we have a very strong position in research.

We have an almost incredible FinTech ecosystem. Um, and nearly every one of our members is already using AI.

00:08:08.060 — 00:08:45.620 · Wigley

Then you look at our regulatory regime, which is different from the way, for example, the EU has approached it. So we've stuck with sector based regulators, not some sort of overarching cross-cutting regulator. But adoption of AI is high. It's moving rapidly. Most of my members are looking to increase investment in AI, unsurprisingly, because we're a risk averse industry.

Whatever the regulation, we have ourselves self-regulated to be careful about how we introduce AI. So that's been a big focus. I think the really exciting opportunities we move forward now is, is agentic AI and putting AI into the into the customer delivery equation.

00:08:45.660 — 00:08:46.740 · Keane

So driving growth.

00:08:46.780 — 00:09:25.880 · Wigley

Instead of you know, but again, you know, if you think about applying for a mortgage, a lot of the questions that you need to ask as a, as a financial advisor and the answers that are given fit within very Standard sets. And again, this is a brilliant opportunity to use AI rather than rather than a human being.

So we are developing across the industry and across different consumer conversations. Um, the use of AI where appropriate and with appropriate human intervention and governance, um, with the opportunity of improving the customer experience and reducing costs for the bank and in some cases actually increasing the accuracy of responses.

00:09:25.960 — 00:09:54.240 · Keane

Hmm. Yeah. And do you think then just going back to from an attractiveness perspective, do you feel even if you look at the international banks or the international players here in the UK, do you feel we are doing enough to attract them in for innovation hubs to drive innovation out of the UK?

Because it's not all about regulation either. It's about, you know, how are we standing up globally as an innovative market and one to invest in?

00:09:54.320 — 00:10:22.610 · Wigley

I think the answer to that question is very highly. I honestly believe the UK has an innately innovative culture. We have these great universities, we have a very strong entrepreneurial mindset, and so the level of innovation in the UK is enormous. And it's sort of almost like a national, uh, a national characteristic and an asset and one that we must absolutely protect and nurture but will stand us, I think, in very good stead for the future.

00:10:22.650 — 00:10:49.530 · Keane

And it has always been seen like that. We talked you said earlier about it's not all in London, right. It's not all in London. And we have fantastic regional centres where we are seeing really good development, including innovation. Can you talk to me about the role you see our regional financial centres playing in the in the growth of the sector for, for, for the UK and from an attractiveness perspective

00:10:49.570 — 00:12:16.890 · Wigley

For sure. And you know, the list is long whether you think about, you know, Edinburgh or Leeds or Manchester or Birmingham or Bristol or Brighton or Bournemouth. There are, you know, big financial centres or individual organisations that have made that that city the centre of some of their back office or other operations.

Yeah. So this drives regional growth. And why are they doing that. Well, because the talent is available in those places. London is a highly competitive market. It's more expensive both the office space and the people more expensive. But in some of the regional centres there is talent available coming out of great universities.

And so sensibly, you know, international players and national players are investing around the country. Um, and as I said earlier, the, the job situation reflects the fact that, you know, nearly half of it is outside London. Now, you did a some research on the attractiveness of hubs as a firm, as you know.

Um, and what are the key selling points there? Well, it's access to a local workforce. It's access to regional grants. Obviously, the government has been you know, the previous government was working on its levelling up policy. This prime minister was elected on the back of, you know, his attitude to regional investment.

There are regional economic advisory bodies who help try and promote economic activity in the regional hubs. And um, so your survey found whilst 52% of people choose London, 44% of people are interested in Edinburgh, 23 in Glasgow.

00:12:17.010 — 00:12:19.330 · Keane

Glasgow’s another major hub, by the way. Yep.

00:12:19.370 — 00:12:38.010 · Wigley

Yes. And 20% in Cardiff. So you know this this is well spread around the UK. You know if you look at, look at it the other way around, where is the financial services sector lending money. Just look at the small and medium sized loan and overdraft business. Um 78% of that. That's about £66 billion is outside London.

00:12:38.090 — 00:13:03.190 · Keane

You speak so eloquently and so confidently about UK financial services. And we talked about like all the all the positives here, albeit there are always challenges. What would you say to us as financial leaders, could we be doing more of around, I would say, being confident about the UK as a global hub.

Selling our reputation globally. What would you ask of financial leaders?

00:13:03.230 — 00:13:05.590 · Wigley

Well, I think I think we have a natural.

00:13:05.630 — 00:13:06.470 · Keane

I being one of them.

00:13:06.510 — 00:14:38.760 · Wigley

Yeah, both of us. I think we have a national characteristic, which is slightly to talk ourselves down. Or maybe it's being modest. I don't know, maybe it's not bragging. Obviously, you're comparing yourself with competitors like America where the, you know, the sales mentality is perhaps more intense than we would have as part of our national sort of characteristics.

So I think it's just being out on the front foot and, you know, stating the facts. I'm simply telling you the facts. I'm not making this up. And the story is a very good one. So we should be telling it and telling it loudly. And, you know, we have obviously we have organisations like your own, we have TheCityUK, we have the London Corporation, the mayoral visits, we have the Department of Business and Trade.

I should say, by the way, that, you know, we work incredibly closely with the government on this international messaging, and they have a very good process by which when they're thinking about with which countries to enter into a new trade agreement, and that's led to some great results. If you think about the agreement with Singapore.

If you think about Japan or India, we've got agreements which are, um, in many cases, firsts. They talk about digital trade. They talk about digital tokenization, electronic identity, you know, these technologies of the future that they're here now. But they're crucial to the future where we can work with leading, uh, you know, other international nations and move faster together.

So, so I think, um, we just need to be out on the front foot telling the story. Be bold, be confident, be factual, and then be smart about how we work with other countries to maximise the benefits that the UK offers.

00:14:38.800 — 00:15:09.260 · Keane

And Bob, you just, and I meant to pick up on this earlier when we talked about tokenization, right. And we talked about trust and financial services equates to trust, right. Which is then when you talk about digital assets and tokenization. Let's go back to that for a moment. Right.

Because and then how the, the, the role of the UK can play and the role financial services specifically can play when we talk about digital assets and tokenization.

00:15:09.260 — 00:16:16.680 · Wigley

So this is this is the biggest opportunity of my working lifetime. Digital tokenization. So what is this about. It is about in the future being able to own a share in a company or a bond or a commodity or some FX via a token rather than via a piece of paper, essentially is what we're talking about. And why does that matter?

Well, it matters because you will then be able to apply smart contracts to those tokens, and you'll be able to reduce significantly the processing costs of transactions. And the cost savings are enormous. And the benefits for consumers, I think, will be huge. And this is probably the most single transformative bit of technology that I've ever seen in financial services is huge.

So it's important the UK leads in it. We are already a leader. I would like us to push faster and harder. Of course, that's my job. I'd love, just love to hear the Chancellor stand up and say, we intend to lead the world in the regulation of digital, digital tokenization. And I've heard ambition. I've heard, you know, I've heard positive statements.

I haven't actually heard that bold statement. I'd really like to hear it from the new chancellor.

00:16:16.720 — 00:16:28.160 · Keane

Yeah, yeah. And hopefully with all of this in place, the legal part of it, the confidence will be there to actually stand up and say that. So yeah, we could talk about that for a long time, couldn't we?

00:16:28.200 — 00:16:57.100 · Wigley

We certainly could. And UK finance is working closely again with the industry with the Bank of England, with the Treasury. We have some amazing things going on. So just last week, uh, the very first transaction involving the sale of a house, um, where the payment was reflected in a, in a digital token.

So the so-called Great British Tokenised deposit. Yeah, that transaction took place. So we've demonstrated it works in a real life situation on a, on a functioning platform. So now the opportunity is to move that to scale.

00:16:57.140 — 00:17:35.180 · Keane

Yeah. And I think you move from a fear of tokenization to embracing it and seeing the actual benefits of it. It definitely for a while has been the unknown. And now it's becoming the known. And that's and giving people the confidence to sell it. So listen, um, we are going through a lot of change. Profound change.

You just said there. I mean, this is even transformational in your in your lifetime. And when we look to financial leaders, I'm going to finish with the final question or a question for you to pose I suppose, to, um, financial leaders across the industry. What is that bold question you would say financial leaders should be asking themselves right now?

00:17:35.300 — 00:18:00.430 · Wigley

I don't I honestly don't think there is one silver bullet question. Uh, not not to doubt your question. I think it is, uh, moving on the 40 points in our paper and then I think, you know, it's focusing on some of the big opportunities. It's making sure we get AI right. It's making sure we get digital tokenization right.
And that we are seen as, if not the, you know, in the top two world leaders in that area. Let's be great at that.

00:18:00.470 — 00:18:13.630 · Keane

Yeah. And not being afraid. I think the most successful firms would be those that are not afraid to move forward with decisions and get on with it in uncertain times, because these times are not going away, I think. I mean, listen, we're in transformational, transformative times.

00:18:13.670 — 00:18:30.750 · Wigley

We are. But we have an incredibly innovative industry. We have bold leaders. It's all about getting the balance right between, um, you know, trying the new product in a controlled environment with the appropriate governance and risk controls and doing pilots and then moving to scale quickly.

00:18:30.790 — 00:18:32.430 · Keane

Yeah, yeah. Thank you, Bob.

00:18:32.470 — 00:18:33.150 · Wigley

Thank you for having me.

00:18:33.150 — 00:18:43.510 · Keane

To hear future episodes with leading voices from across financial services. Subscribe to the series on your favourite streaming platform today, or head over to.

00:18:47.110 — 00:18:49.670 · Keane

www.ey.com/uk/oneboldquestion

The views of third parties set out in this publication are not necessarily the views of the global EY organization or its member firms. Moreover, they should be seen in the context of the time they were made.

Presenters

Martina Keane

EY UK & Ireland Financial Services Leader

Podcast

Episode 1

Duration

18m 55s

EY refers to the global organization, and may refer to one or more, of the member firms of Ernst & Young Global Limited, each of which is a separate legal entity. Ernst & Young Global Limited, a UK company limited by guarantee, does not provide services to clients.