Labour Party Conference: What does it mean for financial services

The financial services sector could be forgiven for feeling like it left Labour Party conference still in the dark about how its sector will be empowered to deliver the economic growth that will be at the core of Labour’s mission-led Government. While it felt like some Ministers had their appearance on fringe panels restricted, City Minister Tulip Siddiq was omnipresent.

Unfortunately, with Chancellor Rachel Reeves set to hand down her first budget in a little over a month and new Pensions Minister Emma Reynolds still working on the Pensions Review, Siddiq was left with little to say other than platitudes about financial and professional services having a key role in the Government’s growth mission.

Attracting growth

Siddiq was quick to spotlight the importance of attractive private growth and capital, pointing to possible reforms of the listing regime, the National Wealth Fund and the upcoming Investment Summit and namechecking BlackRock as a confirmed attendee. With a noticeable change in Reeves’ demeanour and optimism, the Government is clearly wanting to signal to investors that the UK is open and ready. Siddiq herself said that rhetoric and narrative is key to investment attraction. She’s not wrong, but post-Budget, industry will want more than motherhood statements and platitudes.

However, as set out, people who wanted to know the detail of how growth will be achieved were left wanting. While some things do simply have to wait for the Budget, there was a sense in some camps that Labour was less prepared than people thought; this was especially frustrating for many I spoke to given Labour published its Financing Growth plan earlier this year. Siddiq proudly exclaimed she was responsible for the commitment to double mutuals; however, was unable to set out a plan to achieve this.

What about the regulators?

What is clear is that this Government will look to the regulators to pull the levers as much as they can. For a party that made clear it wanted to have the ‘ear of business’ and be a ‘party of business’ before the election, suggestions that stakeholders and sub-sectors should lean into the regulator to make sure they’re heard by government seemed odd. There won’t be a shift away from the competition objective; however, there will be changes with Siddiq saying multiple times she wanted the FCA to simplify the rulebook and make sure that a complicated set of rules isn’t stifling innovation and growth. The sector should also expect a change in tone with the Minister seemingly inclined to revisit ‘name and shame’ and said she took issue with how it was communicated.

Looking out for consumers

The only firm, clear commitments I took from the fringes were that the buy now, pay later sector will be regulated, with a clear vision from Siddiq that vulnerable consumers need to be protected from bad actors. While achieving growth was the key topic of conversation, not the consumer duty, I expect Labour to look beyond the BNPL sector to ensure that consumers have access to financial advice as part of the Fair Finance Strategy that the City Minister is working on, with Siddiq flagging that financial inclusivity and secure credit remains a key priority as they develop a Financial Inclusion Strategy.

Innovation and growth

Without being able to go into detail on how her plans to drive economic growth in and through the FS sector, skills was another focus of Siddiq’s many panel appearances. In particular, she seems keen to understand how Skills England and FinTechs can ensure young people have pathways into roles in financial and professional services, especially outside of the traditional financial hubs of London and Edinburgh.

The Government is open to a conversation about how we can increase the risk appetite, when innovating and investing to drive growth, so we’re more on par with Europe. There is a balance to be had, though, between competing priorities and fiduciary obligations. For all the talk of the power of pension funds to drive investment in UK plc, the Pensions Minister was limited in what she could say because of the ongoing work on the Pensions Review; however, Reeves did flag reform of the pensions system in her address on the Monday.

Setting the scene for a difficult Budget

In addressing both the party faithful from the mainstage and business leaders in private events, the Chancellor made clear that there are difficult decisions which need to be made and she’s not afraid to duck them and that they won’t dim Labour’s ambition. Hamstrung by timing – with many businesses questioning why there couldn’t have been a Budget in September or a few more nuggets – Reeves could only say there will be no return to austerity and this will be a budget of growth and investment. However, with pressures on public spending real and a comprehensive spending review which is likely to recommend some departments have their budgets cut and spending restricted, the language on austerity rang a little thin with some.

While working people is yet to be defined, many I spoke to thought it will be narrower than a traditional understanding of it being people who work. With Treasury and the Department for Business and Trade set to publish a new Industrial Strategy next month, many are hoping that business and industry aren’t easy targets for revenue raising. There’s also a concern that the soon to be published Workers’ Rights legislation will – unintentionally – hamper productivity, innovation and growth.

So. What does it all mean?

In a nutshell – the financial services sector is still in the same state of stasis it was in before the election and will be until after the Budget. Labour knows there’s a lot of untapped potential here and sees the value of the sector and its wider value add across the whole of the economy. Now it's just a waiting game as the sector hopes the Budget provides clarity and can give the City confidence that Labour has a plan to empower the sector to realise its full potentail and drive economic growth and investment across the country.