DeHavilland Senior Policy Consultant Miles Braslavsky has produced a financial services and economy round-up from last week’s Conservative party conference.
- The Conservative Party is united in the view that the economy needs to be stimulated to spur growth but divided on how it should do so.
- Sunak and Hunt have been on a charm offensive at party conference. But with Labour conference looming and the party’s business credentials growing, it is becoming evident that the party may no longer be able to capitalise on having the undivided support from the business and financial services community.
- Treasury Ministers talked of the need to recalibrate the economy’s perception of risk-taking and expressed the view that a total aversion to risk, as has been the case since 2008 has stunted economic performance.
This year’s Conservative Party conference is framed against the backdrop of a deepening internal divide regarding how best to manage the economy. It is worth remembering what was going on a year before at CPC when former Prime Minister Liz Truss and former Chancellor Kwasi Kwarteng were at the helm.
Internal tensions simmered down over the last year as Sunak and Hunt focused their attention to hitting their inflation target, however, ahead of a general election, the debate around the economy and growth has resurfaced, a debate that the Conservatives can ill-afford given the surge of support towards Labour amongst the business and financial services industry.
Liz Truss’s appearance at a speech in a fringe event entitled “The Great British Growth Rally” was purposefully timed to coincide with the Chancellor’s speech on the main stage. The queues to see Truss were starkly contrasted with the relatively quiet auditorium for Hunt’s speech. Was the hundreds-strong queue to see Truss’s speech emblematic of a schism within the party, or was it a case of the British public’s sense of humour? It was probably a bit of both.
Politically, Sunak cannot afford to lose the credential of being economically literate and trust the management of the economy. Sunak and Hunt were on a charm offensive with business spending more time than is typical of a PM and Chancellor engaging at Monday’s business day events.
A tweet from an attendee of the dinner that night suggested that Labour had won over the support from the business community and the financial services sector in particular, with many unable to get their hands on tickets to Labour’s equivalent dinner next week.
There was a considerable focus on how this Government will stimulate economic growth. From fringes on devolution and impact investing, skills, financial services and pensions, the main focus was on how the Conservatives can unlock capital to be invested in high-growth sectors.
One of the main themes spoken to by Ministers this year was the need to recalibrate the country’s views on risk. Both the Financial Secretary and Exchequer Secretary, Andrew Griffith and Gareth Davies, highlighted the importance of altering the investment industry’s perception of risk, which they argued went too far in favour of complete risk-aversion after the 2008 financial crisis.
Increasing risk appetite applies to the Government’s Mansion House pension reforms. Still, as Andrew Griffith said throughout his fringe appearances, this relies on regulators and lawmakers to reduce friction by cutting red tape and in turn making the UK a more attractive place to do business. As with everything at CPC this year, the speculation surrounding the future of HS2 was raised in a fringe event on financial services regulation reform, particularly on a question pertaining to Solvency II reform and the consequential investment into long-term infrastructure projects by insurers and pension schemes.
Creating a more stable economic environment has been of primary focus for Sunak and Hunt during their first year in charge. Stability and certainty are a must to secure long-term inward investment. It comes as no surprise, therefore, that during an Onward fringe with Core Cities and Key Cities, West Midlands Mayor Andy Street took aim at the leadership, suggesting that if you tell the international investment community you’re going to do something, you “bloody well” better deliver on it.
The same fringe event highlighted the importance of devolved and regional power hubs and using cities to attract local and international investment and building local economies around these hubs.