The City stands ready to help the Chancellor deliver good growth in every postcode at the Budget, says Chris Hayward

Recent years have been challenging for people, policymakers and industry leaders alike. Conflicts have been compounded by subsequent, successive economic shocks; damaging supply chains and leaving less well-prepared boardrooms bewildered.

Globally, public finances are under pressure from the bond markets. Finance ministries everywhere are desperate for growth.

The UK is no different, and the government is right to flag that difficult choices lie ahead. It was therefore welcome to hear the Chancellor recognise the importance of tackling the cost of doing business – as well as the cost of living – in his speech last week.

John Healey added “I want to see this country as a country of wealth creation. I want our government decisions and policies to raise the levels of confidence, and investment, and profit in British business.”

I couldn’t agree more. And that’s why we’ve set out in our Budget submission precisely how the financial and professional services sector can support the government to deliver its agenda of good growth in every postcode.

Let’s look at where the evidence leads us.

Financial and professional services already generate £323bn in economic output and contribute more than £110bn a year in tax, around 12 per cent of all UK tax receipts

Financial and professional services already generate £323bn in economic output and contribute more than £110bn a year in tax, around 12 per cent of all UK tax receipts. Two thirds of the 2.5m jobs the sector supports sit outside London, from Edinburgh to Leeds to Cardiff, and roughly one in every 13 workers in the UK owes their job, directly or indirectly, to this sector. This is a national story, and it is telling that the City Corporation has worked with successive governments to achieve it.

Take the Mansion House Accord, in which 17 of the country’s largest pension providers committed to channel up to £50bn of long-term capital into UK businesses and infrastructure by 2030. It’s a clear-cut case of industry leading and the government pulling in the same direction to deliver real, tangible results.

Working in partnership is the best route to the sustainable growth the UK sorely needs to address its domestic and overseas policy priorities, whether on social care or supporting our allies by building stronger defence capability.

While our financial and professional services continues to be world-beating, we cannot be complacent. Our latest research shows our overseas competitors gaining ground in the quest for foreign investment. So my message to the Chancellor for financial and professional services ahead of this Budget is straightforward: do no harm.

Bank tax peril

Let me speak plainly. The sector’s ability to continue contribute record tax receipts will be seriously damaged if its competitiveness is further imperilled by a windfall tax on banks, other sector-specific taxes, or losing the VAT exemption for financial services.

UK banks face a total tax rate of 46.4 per cent, against 42.2 per cent in Amsterdam, 38.9 per cent in Frankfurt, 28.9 per cent in Dublin and just 27.9 per cent in New York. Any additional sector-specific tax would widen that gap further. That leaves the very real possibility that firms will simply choose Dublin or Frankfurt for their next expansion, and the UK will forego the jobs, investment and tax receipts that would have followed.

So what do growth measures look like?  A first step would be setting out a credible pathway to reform taxation on UK equities, including the eventual removal of stamp duty on shares.

Government should also back the institutions built to attract investment, the Office for Investment: Financial Services is the UK’s concierge service for firms weighing where to put capital, and it needs longer-term funding and headcount to do that job properly.

The same applies to enabling infrastructure, InvestConnect, a new AI-enabled infrastructure investment platform prepared with the City Corporation and set to launch later this year, has already signed Cornwall Council, the Scottish Government and the Liverpool City Region Combined Authority as founding partners. The initiative gives investors across North America, the Gulf and Asia-Pacific a direct line to real projects in those places. Deals there – and elsewhere –  will create jobs and growth far outside the Square Mile.

Government should take a holistic view of the investment landscape, using levers beyond fiscal policy. Planning is critical, in the Square Mile alone, we will need to accommodate almost 900,000 jobs by 2050, requiring substantial new commercial floorspace, much of it in tall buildings. We hope the delay to City Plan 2040, which will enable this growth, proves temporary.

In summary, there’s no escaping tough decisions given the fiscal reality, which is why empowering the forthcoming Budget must finally help businesses to shift the dial on growth on behalf of people across every region and nation of the UK.

Chris Hayward is policy chairman at the City of London Corporation