A senior figure in the City of London has called for the British government to flip its trade policy in favour of services, saying this would be a “common sense” move that would help support the country’s economy and unlock prosperity across the UK’s nations and regions.
Last night (19 February), City of London Corporation policy chairman, Chris Hayward, told the city’s annual policy dinner that it was best for the UK to play to its strengths and “flip” its trade policy towards services.
“Prioritising trade policy to promote services – as much as goods – is not creative genius – it’s common sense.”
An economy ‘built’ on services
The UK remains primarily a services-based economy and ranks second in the world in terms of global service exports, with financial services exports alone worth £91bn to the UK economy.
Hayward added:
“Throughout our history, trade has expanded our horizons, growing businesses, creating jobs, and boosting prosperity. Today, our economy is built on services. Services contribute 81% total gross value added and 85% of all jobs nationwide.
“Embedding services into the heart of our trade strategy is a vital step forward that any future government must take.”
He said that the government’s recent moves – such as a Memorandum of Understanding on services with the EU, the Windsor framework, and the restoration of power sharing in Northern Ireland – were all “positive steps”.
“We can unlock economic growth and prosperity right across our nations and regions.”
‘Stronger services’
The calls for stronger services exports echo those of the ‘Global horizons: realising the services exports potential of UK nations and regions’ report issued last year by the Institute of Export & International Trade (IOE&IT) in partnership with Flint Global.
The report found that services were concentrated disproportionally in London and the South East, with “significant improvements” needed to help address this regional disparity.
At the report’s launch, UK export minister Lord Offord said that more needed to be done to create a better “narrative” to explain what services businesses are, including how they contribute to the wider UK economy.
EU de-regulation
Hayward’s speech in the City comes as government officials are planning to raise concerns on financial markets with the EU later this week.
Politico reports that representatives from the Treasury, Bank of England (BoE) and Financial Conduct Authority (FCA) are set to meet with EU counterparts, raising the issue of Brussels’ lighter-touch regulation that is reportedly threatening the UK’s money markets.
The FCA has set out rules to tighten regulations on money market funds (MMFs) based in the UK, but reportedly requires assistance from the EU, since most sterling MMFs are based in the EU.
MMF explained
MMFs are a type of mutual fund that are supposed to invest in short-term, high-quality instruments, and have been identified as an “important vulnerability” by the BoE for the UK financial system.
In July 2023, a report from the European Commission stated that its MMF regulation has been “working as intended” and did not require any further changes, having successfully survived market turmoil during the Covid-19 pandemic.
In previous meetings, European officials resisted pressure from their UK counterparts on the matter, saying that they wouldn’t even consider legislation on the matter until the end of the year.