The symbiotic relationship between Guernsey and the United Kingdom with Miles Celic

Transcript:

Rupert  00:06
Miles thank you so much for speaking with us today. I've got a number of questions here, but as I say, we can go off piece at any stage or whatever, but we're very cognizant that you've recently published a report which examines the UK's financial services sector and the wider ecosystem, and there's attention drawn to the 27 point 5 billion worth of investment from PE funds into some 1600 companies. How important is this to the health of the wider ecosystem of supporting professional services as well as the primary finance sector, to maintain this investment, and how can the UK look to attract further investment from abroad Miles?

Miles  08:21
think that's absolutely right. And you know, we always make the the joke that it's not an official city UK meeting until somebody jobs are outside the M25 and it is a sense that if you look at Birmingham, if you look at Manchester, Edinburgh, you know, all the major centres, you know, they have grown, and they've become self-sustaining in that growth. And it's not just you know that those jobs are back office jobs, because that's sometimes what you hear. You know, these are, these are just sort of low-quality jobs. Not the case at all. So, you know, the UK is the most successful net exporter of five. Financial Services in the world comfortably ahead of the United States, which is second. And about half the exports of financial services in the UK come from outside the M25 as well. So these are high-quality jobs. They're jobs that you know, the sorts of jobs that you know a metro mayor would love to see in their in their city. And so there's a lot of competition for those to approach, to be approached and to be taken into those cities. I think the interesting thing that's developing is the expertise that's developing in some of those cities, and the specialisms that are developing in some of those cities. So AI FinTech in certain centres. Manchester has huge in those areas. Birmingham, on banking, and in Guernsey, it's the specialism that's developed in areas such as captives, that's developed in areas such as green finance, etc. I mean, there's a huge growth area there, and specialism that Guernsey's developed. That's right. Certainly, as part of our report, we feature the next energy solar fund, and it's obviously something that we're very proud of. Not only is it a Guernsey Green Fund, Guernsey Green being a world first in innovation, we've got the natural capital fund, and again, having a regulator that really understands it, that is robust but proportionate, but is an innovator as well, is great for us. But again, just touching on that 57 billion of capital that's in the UK at the moment, I think some people forget as well is that is the returns it creates for UK investors. We've calculated that's going to be 7 billion of returns. It's also three to 4 billion of social returns as well, going into social infrastructure, going into environmental causes. And that is obviously something that not only the current government, but the incumbent government, possibly as well, is really looking at, do you think financial services gets its due for, actually, you know, contributing towards that, those those worthy causes and that kind of infrastructure? I think it's better than it was. I think it's better than it was. And look, let's be candid, we've sort of blotted our copybook as an industry in the minds of many people in the 2008/2009 crisis, and there was a sense that we hadn't done a sufficient job of communicating to the rest of the country and our fellow citizens. This is the benefit that the industry provides. And I think it's whilst it's really important to make the case for you know, it's the billions and billions of tax revenues that are generated by the industry and where they go. So, you know, we always make the point that the defense budget in the UK is half the amount of tax that is raised by financial services and professional services. The NHS budget, you know, we're about somewhere between half and 2/3 NHS budget in terms of the tax that we raise, and that's really important. But we shouldn't lose sight of what we do for people day in, day out and as well as the tax that we raise, as well as the economic growth that we generate, as well as the jobs that we can create in cities up and down the country, when somebody buys their home, when they save for retirement, when they send their kids to university, when they ensure what's precious to them. It's our industry that makes that possible, and we've got to make sure that we're always telling that story. 

Rupert  13:09
So miles, the report gives focus not only to the finance industry, but the wider supporting industries as well, because obviously when you look at the finance industry, everybody thinks banking, everybody thinks insurance, whatever. But obviously there's actually a lot more to it, and a lot more to the overall ecosystem, and a lot more that makes the UK so competitive. So the partnership between the UK and the specialized private wealth sectors, and you know that Guernsey has really allowed many industries such as the legal and advisory services in this increasing uncertain the world. What actions can the UK and partners like Guernsey take to ensure that the British family is at the forefront of this industry for years to come?

Miles  13:51
 So I think this is, this is really the critical question. And whoever wins the election, you know, whenever the election is held, this is what they're going to have to grapple with, not least because, as we've been talking about, our industry is a large part of driving growth across the rest of the economy, and the social benefit that comes from that as well. So my sense is, there's some interesting stuff that's been going on in terms of, as we talked about the Harrington review, I think it's important that there's a clear partnership between industry, government and regulators. And I have to say, you know, and this is something you and I have talked about before Rupert, and the point that we've made to UK government and the opposition, there are some real lessons that can be learned from the experience of Guernsey. So, you know, one of the things I've always really admired about Guernsey is there's a nimbleness to the way that Guernsey operates. Because you've had to be you've had to be nimble. You've had to identify where the opportunities are and the best way of seizing those and I think there's a lot there in terms of the fact you can get all the decision makers around a core issue relatively quickly make a decision and crack on. And you've already talked about, for instance, on green finance and the sort of pioneering perspective that Guernsey took on that. So I think as the UK moves forward, we're going to need to see more of that kind. Kind of activity, more of that kind of approach. And I think, honestly, that's the direction the world is heading in anyway. And so the faster the UK can learn from experience that already exists within the British family, the quicker we're going to benefit from it. 

Rupert  15:13
And again, part of your one of the new reports is looking at the regulator and looking how each regulator can be more competitive, can actually help to drive growth, and we're no different in Guernsey. Thank you. Obviously, we do appreciate that. We do have a good regulator. We have a robust but proportionate regulator. Accessibility is absolutely key as well, is being able to bring new clients over and being able to actually introduce them to the regulator, so the regulator can understand the mechanics of their business, which, for us, then makes us very competitive. It means that we can then bring that business on board quickly, swiftly, hopefully at a lower cost as well. You think competitiveness from a regulator, it's got to be fundamental, hasn't it? And you know, this is something that you really kind of tackle in your report. There any points that you actually gather from that? 

Miles  16:07
Yeah, I mean, I think this is absolutely critical, and we really welcome the secondary objective the regulators were given here on growth and competitiveness. And I think that's clearly the direction of travel that politicians of both parties are beginning to grapple with in the UK, and I think we're seeing that globally as well. The report that we did with Freshfields, looking at what we can do in terms of benchmarking with other regulators is really interesting.   So there are, we looked at 21 globally significant regulators the UK was unusual in having a clear objective, explicitly stated on growth and competitiveness, but most of them in one form or other, had something like that. The measurements were very different, so actually creating a common set of benchmarks is going to be the next challenge. So we're going to go away and we're going to look at that and see what might be possible. But what was really clear was one of the things the UK has done well, and I think credit where it's due is it's been very transparent about how it's going to go, after the creation of KPIs, around the success on the secondary objective. And we think that's very welcome. Industry definitely welcomes that. But I think as we move forward, there's going to be more and more pressure and more and more expectation to benchmark regulators against each other in these key areas, and we are in we've got to, you know, we've got to face up to reality, particularly in developed economies. We are in an era of low growth, and when we think about the challenges that our societies face, whether that's decarbonization, whether it's the debt that's built up over time, the demographic change. I'm sure there are other challenges, not beginning with D, you know, she can throw in defense and rearmament and so on. There's another one that does, that's got to be driven by growth, that has got to be given driven by growth, because there's no other way of doing it. So therefore, I think that then speaks to a partnership approach, as I've said, between industry and regulators and government to see how we can do that. So I think there's a lot to do in this space. I think one of the interesting things that our industry is really going to be able to play a role in here, and it's particularly prevalent on the green finance side, is on blended finance, how can the state work with industry to unlock the kind of capital and the kind of investment that we need to move us towards decarbonisation, and that might be a model that work in other parts of the economy.

Rupert  16:31
Yes. And I think, just to wrap up, I think partnership is absolutely key, and that's one of the things that we're really trying to drive forwards with our report, is basically saying we're part of the British family. You know, we have been for so many years, and it's, it's about not us being in competition with the United Kingdom. It's us collaborating with the United Kingdom. And it's having a financial services industry that is complementary to what you do here. I think there's things obviously, from a United Kingdom perspective, absolutely world-leading. And again, we would hope, from a Guernsey perspective, if you look at our captives industry, we've had a captives industry that's been established for over 100 years now, which gives it that kind of longevity. It gives it that stability. 40% of FTSE companies currently have a captive in place. I know there's a consultation from from Treasury at the moment, and from a currency point of view, we always welcome competition. We always welcome collaboration. But do you think really that having that degree of stability and longevity, it surely must display that we are a financial centre of substance, and that, you know, we can collaborate together, and we can work together going forward. 

Miles  19:43
I think that's that's absolutely right. One of the points we've always made is that this, this means that we've got a selection of clubs in the British golf bag, if I put it in this way, you know, there are a variety of different specialisms that exist, and there's a variety sort of moving away from the golfing analogy, but there's a variety of ways that the different centres and. The British family cooperate with each other to the mutual benefit of both and to the overall strength of that British family. And I think the thing that I've always found really exciting about the British family of financial centres is that it is more than the sum of its parts, and it's the closest thing I can think of to what exists in the United States. So everybody always focuses on New York, but of course, you've got FinTech in San Francisco, you've got exchanges in Chicago, you've got growing centres in Florida, you've got wealth management and a number of key centres, and we actually have our own version of that in the UK, and I think it's a massive national asset. And as we've talked about, it doesn't always get the due that it deserves. That's, I think, therefore, on us to make sure that our fellow citizens understand the benefit that we're that we're bringing. But I think it's in a terrifically strong place at the moment, and I'm really excited, you know, by where we're heading over the longer term. I think I'm a massive optimist. I think about the advantages that British family has, and the relationship between the centres on the mainland of the UK, Guernsey, other parts of the British family, I think, will be absolutely central to the long-term success of that.

Rupert  21:07
Fantastic, miles. Thank you so much. Been an absolute pleasure to be with you today, and we look forward to working more closely with City UK now and going forward. 

Miles  21:15
Thanks very much. Rupert, thank you. Relationship to Guernsey is hugely important to us, as you know. Thank you very much. 

Rupert  21:20
Thank you. 

Miles  21:21
Thank you.