After the latest banking industry scandal, it is surely time for the government to invest in the future – and that future is surely technology.
For the last 25 years, since Margaret Thatcher deregulated the City of London in the so-called Big Bang, government industrial policy has favoured and nurtured the UK’s financial services industry. For most of that quarter-century, we all benefited, as ever more creative banking products caused a debt-fuelled economic boom of unprecedented proportions. We all know what happened next.
The debt crisis is showing no signs of easing in the near future, and the Eurozone lurches from short-term fix to short-term fix. The latest banking scandals – Libor manipulation, financial mis-selling etc – have led many to believe that the UK’s banking industry is institutionally flawed and motivated by avarice.
There is a creeping inexorability that the financial services industry is heading east to escape the bitter censure it is increasingly receiving in the West.
It seems more and more likely that the Eurozone will impose some form of financial transactions tax. David Cameron will try again to resist, but public sentiment towards the banks is in the toilet, and people feel it is time the banks paid for the austerity they induced. Greater regulation is also inevitable.
The long-touted excuse that banks need to make huge profits and pay executives exorbitant bonuses to attract the best people to work in the UK is becoming a lame justification, as those “best people” get exposed for their parts in the latest scandals.
BBC Newsnight correspondent Paul Mason (an ex-Computer Weekly journalist, by the way) wrote a devastating commentary on Barclays, revealing that the bank has taken £3bn of capital out of manufacturing industry, and more than £3bn out of the retail/wholesale sector.
It seems that banks are not only feathering their own nests, but taking the contents of others.
China will be only too keen to encourage a shift in the money markets to the East. It’s not going to happen overnight, and there will always be a sizeable finance industry left in the UK, but slowly, inexorably, over the next 20 years or so – perhaps less – the UK will no longer be able to rely on financial services as a cash cow as finance firms move their headquarters to more welcoming environments.
That all means that this and subsequent governments need to decide what sort of economy the UK should have in 20 years’ time, and set policy and investment priorities for that now.
Surely, it must be obvious that such a future will be as a high-tech, digital economy. Successive governments have promised to deliver a Digital Britain, but have mostly delivered only rhetoric.
There are obvious things to do: further invest in fibre broadband; speed-up the roll-out of 4G mobile networks; tax breaks for research and development; IT skills development at all stages of education; encouragement and support for more technology clusters such as the much-talked-about Tech City in London – the list goes on, and is not a difficult one to produce.
Financial services is no longer the future for the UK economy – technology is. We need policy-makers, lobbyists, advisers, politicians and decision-makers in government to accept that and act accordingly.