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Budget breakfast

GK Point of View – The GK Budget Breakfast Review

GK Associate Hugo Tuckett reviews GK Strategy’s Private Equity Breakfast, where the Spring Budget and the general election were key discussion topics. 

Will Jeremy Hunt use the Budget to put Labour on the back foot? 

On Tuesday 27 February, GK Strategy was delighted to host professionals across private equity, corporate finance and wider deal advisory at a panel event to discuss what we can expect in politics over the next 12 months. The panel included The Rt Hon. David Laws, former Chief Secretary to the Treasury, and Chris Giles, Economics Commentator at The Financial Times. The discussion was chaired by GK’s CEO, Louise Allen. 

A key theme of the discussion was the Government’s priorities for the upcoming Budget. The panellists agreed that challenges within the UK’s public finances would limit the Chancellor’s flexibility to implement wide-ranging tax cuts in the months leading up to the General Election.  

Instead, they argued that the Government would prioritise smaller, targeted tax cuts that would create a dividing line with Labour. A reduction or phasing out of inheritance tax was touted as the one area where the main opposition party would struggle to match the Conservatives. 

Labour’s immediate fiscal priorities, should it win the upcoming General Election, were also addressed by the panel. David Laws suggested that the Shadow Chancellor, Rachel Reeves, would have to decide whether to follow Gordon Brown’s approach post-1997 and commit to a Conservative government’s tight spending plans, or as was the case post-2010, label the previous administration financially irresponsible and introduce a series of tax rises and spending cuts to balance the books. 

He later suggested that the Chancellor, Jeremy Hunt, might try to use the next few months to lay a series of traps for Labour, such as a commitment to reduce income tax in April 2025, in an attempt to create some separation between the two parties ahead of polling day. 

Please get in touch via (hugo@gkstrategy.com) if you are interested in attending future events or would like to set up a call to discuss the year ahead in politics.  

 

GK Insight – Dr Iain Wilton on the future for financial services

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GK’s Head of Research, Dr Iain Wilton, reflects on the future of Britain’s financial services in the wake of the Queen’s Speech. 

Many aspects of the Queen’s Speech have received a lot of attention, from the absence of the Queen herself to the inclusion of so many housing-related bills – less than a week, in fact, after housing issues contributed to the Conservatives’ poor local election results, especially in London.

Surprisingly, however, relatively little attention has been paid to legislation that will fundamentally affect one of the UK’s most significant, successful but sometimes controversial sectors – its world-renowned financial services industry.

Together with associated professional service businesses, it employs more than 2.3 million people around the UK and contributes £193 billion to the economy – including £75 billion in taxes – yet some fundamental changes to its operation currently risk going ‘under the radar’.

Somewhat overshadowed by the announcement, in the Queen’s Speech, of 37 other pieces of legislation, the Financial Services and Markets Bill will cover everything from cash access to cryptocurrencies and scam prevention to the latest financial technology (fintech). Above all, the Government plans to introduce a new regulatory regime which will diverge from the EU model, encourage greater investment (especially in infrastructure) and, in the process, provide some of the ‘Brexit dividend’ that ministers are desperate to deliver before the next general election.

It will be a far-reaching piece of legislation. Moreover, it was accompanied in the Queen’s Speech by the dry-sounding but highly significant Draft Audit Reform Bill, which recognises that some high-profile company collapses (e.g. Carillion) have shaken people’s faith in the UK’s existing audit, governance and corporate reporting systems. As a result, competition will be increased, a new regulator will be created and, if the Bill is successful, trust should be rebuilt.

Both pieces of legislation will be subject to exhaustive scrutiny by MPs and peers, so each is certain to be amended and neither will be enacted any time soon.

In the meantime, however, significant changes are still afoot. In particular, the Financial Conduct Authority has recently published its new three-year strategy, which will result in the FCA becoming both a larger and a “more assertive” regulator which, in its words, wants to be “testing the limits of our own powers”. Indeed, after concluding that, at present, “firms are not consistently putting consumers first”, it will be publishing both an important “fair value” policy and an overarching “Consumer Duty” for financial services firms.

Due for introduction in late July, the ambitious new “Consumer Duty” will “set clearer and higher expectations for the standard of care firms give customers” and require them “to act in good faith, avoid foreseeable harm to their customers and support and empower them to make good financial decisions.”

At GK, we believe it represents a far-reaching tightening of the UK’s system of financial services regulation and, accordingly, it will be essential for firms to understand their new obligations and prove their compliance.

The Government’s legislative agenda, outlined in the Queen’s Speech, certainly dominated the headlines for much of the following week; its 38 bills will keep Parliament busy throughout the coming year; but some important policy changes are already imminent in the financial services sector – despite their low political profile – as the FCA prepares, even without new legislation, to flex its muscles as never before.