Thursday, March 28, 2024 | Ramadan 17, 1445 H
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EDITOR IN CHIEF- ABDULLAH BIN SALIM AL SHUEILI

Growth to boost competitiveness

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As part of a push to secure the UK’s status as a leading financial hub, the government will task financial competitiveness.


In a sweeping set of reforms launched last week designed to overhaul the regulatory regime shaping the financial district (known as the ‘City’) of London, the Government said regulators would be given a further objective to “facilitate the long-term growth of the UK economy” alongside their existing obligations.


The new rules will also subject regulators to tougher parliamentary scrutiny, which some will see as reining in the regulators’ independence. Under the proposals, the Financial Conduct Authority (FCA) and the Prudential Regulation Authority (PRA) will have to launch a wide-ranging review of their rules at the Treasury’s request if the Government believes the current regime is not “in the public interest”.


The City’s chief lobby group called on the Government to go even further in the severity of checks and balances on the FCA and PRA, likely leaving the regulators more than a little concerned.


Chief executive of TheCityUK, Miles Celic, said: “(We) urge the Chancellor to take this even further, committing to a regular independent review of the UK’s financial regulatory regime to ensure that the rules are proportionate and coherent.”


Other City bosses embraced the stepping up of accountability of the FCA and PRA. Policy chair at the City of London Corporation, Catherine McGuinness, said: “It is crucial that our regulatory system is agile and dynamic, we welcome the Chancellor’s proposals to strengthen scrutiny”.


Nikhil Rathi, the boss of the FCA, has already committed to building a more agile regulator that maintains the UK’s reputation as a “great place to do business”. However, the Bank of England has repeatedly urged the Government not to impose a formal competitiveness remit on regulators due to concerns it could trigger a return of softer regulation that partly led to the financial crisis.


Chancellor Rishi Sunak said the shake up “will support the future strength of the UK as a global financial centre.” The proposals sparked concerns in the City that the FCA and the PRA will struggle to meet the demands due to perceived underfunding.


Tim Dolan, a partner at Reed Smith, said, “without adequate resources the regulators cannot make the UK’s regulatory framework succeed in the nimble and competitive manner that the Treasury may envisage.”


Meanwhile, on the matter of growth, figures show business output growth fell for the sixth consecutive month as businesses face labour shortages and soaring energy prices.


Output growth has hit the lowest level since March, when Britain was in the depth of lockdown, according to accountancy firm BDO’s latest output index.


The index, which looks at the manufacturing and service sectors, dropped 105.23 points in September to 103.35 in October.


Supply chain chaos has been especially tough for manufacturing, which saw its output growth fall by 2.09 points to hit 97.03 in October.


The 95-mark separates growth and decline. A slowdown in the services sector was driven by staff shortages, with output dropping 1.85 points to 104.15 in October.


The end of the furlough scheme at the end of September caused the firm’s employment index to drop for the first time since January. The employment index fell 1.13 points to 107.65 in October.


Kaley Crossthwaite, partner at BDO, said: “Businesses are facing an increasingly difficult winter. Between rising inflation and a lack of staff, 2022 could be a difficult year for companies, who have been forced to prioritise short-term problems over long-term growth.


Against this backdrop, consumers have also started to see the impact of shortages in rising fuel and energy costs — potentially limiting spending. (The writer is our foreign correspondent based in the UK)


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