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Can the Tories win back the City? Bim Afolami lays out his vision for London l Bonds & Ballots
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Oct 7, 2024
Can the Tories win back the trust of the City after two years of turmoil? Will Labour’s new prawn cocktail offensive sway the hearts and minds of the Square Mile? City A.M.’s new Bonds & Ballots series unpicks the ties between Westminster and the City and gets to the heart of the issues shaping the debate on business ahead of the election. Every Friday, join us as we sit down with the key decision makers in both government and the Square Mile as both Labour and the Conservative party lay out their plans to revive UK business. This week, we went into the Treasury to quiz the City Minister Bim Afolami on capital markets reform, reviving retail investment and how to restore the fortunes of the UK and London as a hub for investment. Hit subscribe to stay up to date with the latest episode - and let us know your thoughts in the comments below. Read the full story 👇 https://www.cityam.com/buy-natwest-shares-not-just-crypto-city-minister-tells-young-investors/ Get more of City A.M. 👇 🌐 http://www.cityam.com X(formerly Twitter): http://twitter.com/CityAM Facebook: http://www.facebook.com/cityam Instagram: http://www.instagram.com/city_am LinkedIn: http://www.linkedin.com/company/cityam
View Video Transcript
0:00
We are in, as you can probably see, a fairly wet and miserable Westminster today
0:05
Just four stops away from the sunny city of London, but in a place that can at times feel
0:10
like a world apart. The city and Westminster, so they do speak different languages, they move at different paces
0:15
and they do have a slight tendency to rub each other up the wrong way
0:19
I'm Charlie Conchie Chief City Reporter at City AM, and in our new series, Bonds and Ballots
0:24
we are going to be looking to unpick the ties between Westminster and the city
0:28
Look at what makes them tick and look at how both sides of the political debate are looking
0:32
to win round UK business and the city ahead of a general election
0:36
In a moment, we're going to be heading into the Treasury here to speak with the man in charge
0:40
of the city brief for the Tory government, Bim Afilami, to hear what he has planned, what the
0:45
troubles are in the city at the moment and what we can expect in the year ahead. So let's head in and find out what he has to say
0:55
Well, Minister, thank you very much for joining us. Good morning. Our first guest on bonds and ballots
1:00
Thank you for having us in. I wanted, if we could, to start with a bit of your own career journey
1:07
We were walking in here today. It's quite an ornate setting. And it feels sort of quite a far cry from the glass and steel of the city where you started your career
1:16
Was that a difficult transition to make going from the square mile into government
1:20
Good question. I mean, just give a sense. So I studied history at Oxford
1:25
And then I went to be a corporate lawyer. and I started at Freshfields where I trained, and then I did a year as an associate and the corporate
1:32
team. I did lots of private M&A and that sort of thing. Then I moved to Simpson Thatcher, which is a great US firm
1:39
where I did M&A, but also a lot of capital markets work. And then after three years at Simpson
1:45
I switched to go and work in strategy and restructuring at HSBC, where, you know, and then I got into
1:53
Parliament. Now, the thing about political careers, as you'll appreciate, is you can't plan them
1:57
obviously I was committed to the party and I've been a member of the party for a long time
2:02
and I was sort of doing all the things that people do when they want to become MPs
2:06
but it was the snap election of Theresa May and I just turned 31 years old
2:11
and then I was elected to replace Peter Lilly who was a Conservative Party legend
2:15
who used to hold this office in fact the office that we're in now in the 1980s
2:20
and so I was obviously very privileged to do that and then when I was in Parliament
2:23
via all sorts of jobs I did party jobs I did PPS jobs
2:27
to senior ministers and then was appointed by the prime minister a few months ago to take up
2:33
this well city minister, which it's such an honour because a lot of people, as you will appreciate
2:40
in the city, know me, they've worked with me. And then when I was in Parliament, I very much
2:45
worked on a lot of these issues as well. So I was very familiar with the issues that I'm now dealing
2:50
with. Do you find the ways of working very different. Often, you know, we have what we call doers or so
2:56
in the city. Do you find the machinery of government at times? Do you miss the private sector and the ability to just get things done when you want to do them
3:03
The truth is very big private sector organisations are quite slow and bureaucratic as well
3:12
But government can be. There's no doubt about that. What I would say, if I were to describe the differences, is I would say in the city
3:20
there is always a clear focus about what the organisation is. broadly trying to achieve
3:30
And though there are different departments and whatever in any business you're in the city
3:34
of any size, that focus is held to pretty strongly because they're sort of run like many
3:40
autocracies to some degree. In government and in politics, it doesn't work that way
3:46
And so a lot of what you have to do is persuade and cajole
3:50
Now, you have to do that in private sector as well, but in government, a huge amount of time
3:55
is spent really explaining to people, persuading them about your point of view, your department's
4:01
point of view, what you're trying to achieve, and try and bring all that together so that you're rowing
4:06
in the same direction. And that takes a lot of time. It's actually often the reason why government's
4:10
bureaucratic. It's not because of inherent sort of slowness. It's because you have to spend a lot
4:15
of time squaring people on what you're trying to do. This new podcast we just launched here is all about
4:19
I suppose, the interaction, the understanding between Westminster City. Do you think that at times that
4:25
you've just described there as lost in the city? Do you think there is a sort of misunderstanding of
4:29
the cajoling, as you put it, and there's some frustration? It may be a misunderstanding
4:33
it's frankly a frustration because sometimes governments are able to work very, very quickly
4:39
So Silicon Valley Bank, when it had its troubles, and you'll remember this very well
4:43
the government pretty much worked over a weekend, and that was largely dealt with
4:50
So I think in the city, what you'll often hear from people is, well, when the government really wants
4:53
to, it can work very fast. And they're right about that, but what I would say is you can't operate as an emergency all the time
5:00
One of the things that we need to do, and it's very much in my brief, and it was something that I was working on in Parliament before I was pointed to this, is we have independent regulators that quite rightly are independent and they need to do their job
5:15
But you've also got government, you have Parliament, you have industry. and making sure that all of those things
5:22
are working the same direction to the right agenda is a really important thing for us to do
5:29
And I know how frustrating it can be from the city when they see one bit of that
5:34
going in what appears to be a different direction from other bits
5:39
So I think one of the jobs that I have is to make sure we bring all those together
5:42
make sure everybody's focusing on the same thing. And again, I'm one minister in the Treasury
5:47
It's a very important department, but across government, You have lots of other examples. Yeah
5:51
I couldn't help but notice we're in your office today. There was a chunky Nigel Lawson biography on the desk over there
5:57
Lawson was a great man in lots of reasons. Look, everybody knows that. But the thing I would recommend about that autobiography and look I have for avoidance of doubt I have no financial interest in the Lawson family art autobiography But the thing I would mention about that is Nigel Lawson was
6:13
a journalist before he went into Parliament. And so he can write very well, but also he can write
6:20
concisely. And that, though it's a very big book, each chapter is divided into quite
6:26
very small subchapters. And you can really go and look at a bit. So, you know, I was interested in
6:31
the Big Bang and how he thought of it. about it in the mid-80s. And I just looked up in the endet's Big Bang. You go in there and
6:36
there's sort of seven or eight pages on the Big Bang. Most autobiographies, you don't get a chance
6:40
to do that. I was going to come on to big bang. So is that a sort of philosophy you're still aspiring to as the city minister now. Do you think that is something we, because of the work that
6:48
he did, that legacy means that we don't have to do a Big Bang in the same way. But where I'm
6:53
2.0 is, well, what I would say is, I think it's important that we have a capital renaissance
6:59
is how I've described it, which is a rebirth of British capital, a rebirth of British ownership
7:06
And that's what our reforms are designed to help kickstart. I mean, if we just do come on to your brief now, you know, you've been in the role since November
7:16
probably, unless you want to give us a scoop now a year ahead of an election, you've got a year there to work in the brief
7:22
With some, you know, as you've touched on there, some pretty big challenges facing the city
7:25
facing UK financial services. is this year really going to be enough to actually make meaningful steps forward there
7:32
Do you think we could actually see some progress in the next sort of 10 months, 11 months
7:36
So, 2024, I see as the end of one thing and the beginning of something else
7:43
The end of what has been a three, four year legal and regulatory reform process
7:49
which started really with Jonathan Hill, Lord Hill's listing review, but there have been lots of other reviews after that
7:56
whole set market review Rachel Kent's research review various other things so it started with Jonathan Hill's work
8:02
and it's continued and this year by midway through the year we really
8:08
would have not just said not just commission the report not just said we're going
8:14
to do a legislated for but actually put into practice the bulk of what we've doing so far
8:20
we've delivered 22 of the 31 reforms we set out by mid year
8:23
we're going to have a lot more that have actually gone through Parliament. And so I say that it's the sort of getting near the end of that
8:31
process. But it's also the beginning of something else, which is the beginning of the process
8:37
whereby with those legal and regulatory reforms having been done, they're not the only thing
8:43
you need to do. There are other changes we need to make. And those changes are underpinned
8:49
by those legal and regulatory changes, in particular, what will they lead to? The changes we're trying
8:53
to make are going to lead to increased investment in the British economy, increased ownership
8:58
for retail customers. These are ordinary people owning stocks and shares. And so it's increased
9:04
investment in British economy, increased by retail, and critically increase the size of our economy
9:10
overall. And those three things are the guiding principles between the reasons for the capital
9:16
renaissance. It's not just academics, not just because we want to do it. In the same way, the Big Bang
9:20
it's not was not just an academic exercise for Nigel Lawson. because he thought it was important
9:24
It was to result in real, meaningful change on the ground. That's what we're trying to do
9:29
You mentioned the three-year, four-year regulatory legislative process we've been to. Is that part of the problem, though
9:36
The Hill Review, for instance, we had recommendations in March 2021. It's now, you know, getting to three years later
9:43
Is there just a sort of culture, you know, of we move too slowly in the city
9:47
Does there need to be a sense of just get on and do it a bit more? I mean, as you all know from things before I was in this post, you know, I often expressed in Parliament frustration at the pace of certain things
10:02
But the truth is that in order to get really big things done, you have to think about them quite carefully
10:10
You've got a process that I think we can shorten overall. But, you know, you've got a process of doing a review, thinking about what you're doing, legislating, secondary legislation
10:20
regulatory rulemaking and then delivery. Is that a pro? I mean, do we need to look at that process
10:28
Maybe, but ultimate, you know, legislation is legislation. And if the regulator didn't consult anybody
10:33
before it put in its detail rules, I'm sure you'd be getting phone calls
10:37
from people in industry saying, the regulator's done this mad thing and they didn't even ask us
10:41
Do you mean? So there is a balance. And look, I am thinking about ways in which we can shorten that
10:45
But we are where we are. The clear trend of direction is there
10:50
You know, when I speak to people in the city, yesterday, for example, I was at Rothschild, this morning with the Chancellor hosting a breakfast for British bank bosses, you know, every single day I am speaking to somebody in the city
11:06
And all of them, though they will have their concerns about certain aspects, have their concerns about regulation, the need to increase the total investment, various other things that they have concerned about very legitimately
11:15
they all say they've recognised the importance of the legal and regulatory reforms we put through
11:20
The job now is for those things to underpin the real meaningful change that we need to see
11:26
Can you, I suppose, give us a sense of, you know, the mood in the room this morning then with those bank bosses
11:31
What's kind of on the agenda? What's keeping them busy at the moment? So I think that the broad atmosphere was, first of all, recognition that this is a chancellor and a treasury that really wants
11:45
to improve the economic prospects for the sector. I think that recognition was clear and stated by everybody
11:52
I'd say the broad concerns really reflect how quickly we can move a lot of these legal
11:59
and regulatory changes. I think that's a fair point for a concern
12:04
Questions about how carefully we coordinate the regulators to make sure that we all rowing in the same direction and that we aren seeing governments say one thing and the regulators do something else And I think we need to make sure that everybody on the same page And then a broader focus on how can we increase the amount that the banks can invest in the British economy
12:27
And thinking about ways in which to do that. And I mean, can you, any solutions there at the moment that are being thrown around
12:32
What's your? I mean, we are, you know, this is part of quite an intensive phase of dialogue
12:40
in order to do that. But what I can assure you is that the Treasury, Downing Street, the regulators
12:47
the industry is all on the same page of recognising the importance of this. And also recognising
12:53
that there are lots of different aspects to the issue and some of them are structural
12:58
particularly when you think of, for example, the capital markets, the public markets, London Stock Exchange, Acquist, AIM, etc. There are some structural issues there that are just
13:06
beyond necessarily the reforms that we've done. On, I suppose, structural issues
13:10
in the public market to the moment. Are you confident that those are being remedied by the sort of regulation tweaks we're
13:18
seeing going through? Do you think there is a deeper, almost sentiment issue there
13:22
Do you think people have soured on London? That's going to be maybe a harder thing to shift
13:26
The truth is, there's been a huge shift toward private capital over the last few years
13:32
So since 2017, the growth in private assets held privately has been 20% each year
13:40
Right? So what you're globally, that's a global number. So in essence, your, that is what's happening generally. Fewer companies, fewer people are going public in the way that we, people used to do 30 years ago. At the same time, what there was a concern, and I think that's why we did a lot of legal and regulatory changes, that there were some of the rules, there were frictions in the, in the London market. And that's why we've made a lot, so many of these legal regulatory changes
14:10
But, and it's important to recognize this, the two fundamental issues, one of which is the need to increase the amount of capital going into the UK capital markets is something we are very focused on
14:25
This is pension funds. Yeah, it's just, you know, and there have been structural changes, particularly around pension funds now having a sort of global allocation model, which basically means the UK being a percentage of the global GDP, that amount being allocated to the UK
14:39
that didn't happen in the past. So there are, and that's a lot of the work we're doing pension funds
14:44
which is saying how can we get them? And they say they want to invest more in the UK, right
14:48
Public and private. So that's one aspect. The second aspect we need to fix is the retail participation
14:54
Over the last 15 years or so, the percentage of individuals who own shares has sort of halved, right
15:01
Now, we need to reverse that. One of the ways in which we're going to reverse that is, you know
15:06
and I'm leading on the NatWest share sale, which the Chancellor announced at the Autumn statement
15:10
we're going to take forward at some point in the next few months. You know, that I hope will be a bit of a moment for sort of British UK PLC
15:18
as to making sure that we have a very strong offer for ordinary people
15:23
to own one of the great British backs. I think that's one thing. But the second thing, which is technical, but does really matter
15:30
is the European regulation on MIFID II really destroyed a lot of the research
15:36
into smaller medium-sized businesses that people used to need to rely on
15:40
if you're going to invest in them because you haven't heard of, most people wouldn't have heard of any of these businesses
15:45
The review that Rachel Kent has done into that is really important
15:51
so that we can get research going again, which will improve the investment going to medium-sized businesses
15:55
And the last thing I'll say, just to address the structural point around the shift towards private capital
15:59
which is a global shift, by the way, and it would be a mistake for me to tell you that that shift will stop or reverse
16:04
is something that we're calling, we call the intermittent trading venue, but what I'm calling Pisces
16:12
and I forget what the acronym is, I sort of messed around with the acronym a little bit to get there
16:16
but to call it Pisces, which is a way of allowing private businesses
16:22
to access capital markets for periods of time. And that is something that nobody in the world has
16:28
And if we can get this right, if we can be the jurisdiction, we can be the country
16:32
that allows private companies, to be able to raise money from capital markets and to bring those with the appropriate safeguards
16:39
And by the way, the regulators are very involved in how we design us for the avoidance of doubt
16:44
But if we can be the first country to do that, that is a huge prize because that is the magic source, bringing private and public closer together
16:53
It's very important for me because regardless whatever you think about, you know, the need of public markets on London Stock Exchange or whatever
17:00
if we do not have really strong retail participation, what that means is ordinary people don't get
17:08
to own shares in this country. And I think that's a real shame. I mean, on the retail side
17:14
there's an apocryphal tale. I'm sure you've heard it in the city as well about city boss goes to New York
17:19
The taxi driver talks about his stock portfolio in the cab. Do we have that culture in the UK
17:24
Because you know, you've pointed to some of the statistics there about share ownership
17:28
Yeah. It's been on the decline. We just don't. don't really have the culture of retail and benefit to it
17:33
So, you know what? I used to, I used to think that. And I say what I was doing last night
17:39
I was with the crypto business council, crypto asset business council at a reception I was speaking
17:46
at them. And six million people in this country, overwhelmingly under 50, own crypto assets
17:54
when I was in a pub in Hitchin in my constituency, the barman who I was chatting to
18:00
he was talking to me about the crypto that he helped. The reason why I mentioned crypto
18:05
and by the way, we're in the process of regulating stable coins
18:09
and we will continue along that process because I think it's important that we do regulate crypto appropriately
18:13
to actually incentivise more investment, not to diminish it, and the sector wants us to do so
18:18
But parking that to one side the reason why culturally this matters is we haven lost the energy of wanting to own assets We haven lost that particularly younger people is that they haven
18:28
seen the traditional in a verticombs, the traditional markets are somewhere where they can do that
18:35
And that's one of the things that I want to change to say, don't just own crypto, own a share in
18:41
Nat West. Don't just own crypto. Invest with your savings through automatic enrollment, invest in
18:48
Britain, the British stock markets. That is the shift that we need to see. It's not the
18:53
cultural thing can actually weirdly be a bit overblown because actually I think people are
18:58
keen to do that, but they just don't see our traditional markets as a way they can do that
19:02
So that's one of the things that we need to change. There's a good quote from the boss of Aquis about making equity sexy again, which I think seems to be a lot of the challenge
19:10
But I was keen just to come into some of the wider politics of the city at the moment
19:15
You know, it's been a fairly tumultuous two years. What are you talking about
19:20
You know, we saw sort of traders and banks slightly baffled by the decision last autumn under Liz Trust
19:26
Do you think that, I suppose, the confidence has been irreparably lost
19:30
You see yourself fighting more of a battle now in the city with your opposite number, Tulips Sadipe
19:36
No, because there is absolutely nobody, regardless of their political persuasion, who doesn't see Rishi Sunak and Jeremy Hunt
19:44
as very strong, stable custodians of the city, right? Not one person said that to me
19:53
Everybody knows these two people, in different ways complementing each other, are the very, very strong anchors for the city more broadly
20:01
And I think that what led by them, the broader government and me following behind them
20:07
have been able to do is to give that stability, but also show that we do need a shift towards a more pro-growth, less risk-averse culture
20:19
And I've said at the FT Banking Summit, which was, I think it was my first public intervention in this role
20:26
there's no point us having the safest graveyard. So I think that what we have is the right balance, and we just need to now keep going along this track
20:34
Do you find it frustrating, though? You're going and having sensible conversations about growth, about boosting the growth of the city
20:40
And then it's slightly blown off course by some of the more extreme conversations around immigration where businesses need talent
20:47
They need people coming into the country to grow. Do you find them at odds with each other
20:51
You're having to often sort of apologize and excuse some of those sentiments? No, I haven't
20:57
I don't think, I mean, look, people have different briefs in government, right
21:01
If I was the immigration minister, I'd certainly a lot more time talking about immigration than I am. Obviously, I'm not
21:05
So I think that when I see and speak to people, there is obviously a broader political conversation as you get into the last year of a parliament
21:16
I mean, that's normal. And there's always that thought around investors saying, oh, what's going to happen and this, that and the other
21:24
The thing I would say, which is most interesting, is that Rachel Reeves and her team haven't really opposed any of our reforms
21:34
This isn't, you know, we have got, and the reason why isn't because they wouldn't want to score political points, and I'm not making, I'm not having you go at them
21:43
It's not because of that. It's because they know that the industry recognizes them
21:47
They know that we need a sensible outcome. And I just say to people who are listening to this, that shows the broad consensus that we've been able to lead on this, like you, pushing for that more pro-growth, pro-innovation mindset that I think
22:04
has been lacking in recent years. I think we've allowed the pendulum to go too far into a sort of
22:10
you know, taking risk out of the system in every conceivable way and allowing that to dominate
22:16
actually to say, look, if we want to grow our economies, if you want to go forward, if you want to do new
22:21
things, if you want to lead financial services sector, if we want the financial services sector
22:26
to invest more in the UK, we are going to need a mindset that leads in that direction and not to
22:31
constantly be in the space of saying we have to stop every, every conceivable risk coming because that will damage our economy
22:40
Just finally, I imagine, you know, this building is very much shifting into budget mode now
22:45
We're in the, you know, weeks before a budget. We saw government borrowing figures this morning, we're calling on Wednesday, you know, lower than expected in December
22:53
Is that more tax cuts to come? Do you feel then, you know, can the city expect a few sweeteners there as well
22:58
What's the... It wouldn't be an interview before the budget if you didn't try and get me to give a budget announcement
23:04
which I would get shot for. All I will say is that nothing's agreed till everything's agreed
23:14
We're not there yet. The Chancellor will make his announcements. We'll wait and see then
23:18
And just finally, hopes and wishes for the city in the year ahead. What's your big sort of themes predictions of the year to come
23:24
I think that by this time next year, we're going to see a city where the capital markets are bouncing back
23:33
where there is increased investment in the UK, where there is increased retail participation
23:40
led by the NatWest share sale, but not just that, in this country
23:44
and a British economy that continues to outstripped. Every single year, the observers, the forecasters appear to be wrong on the downside
23:54
a British economy that continually outpaces them because we've made the right reforms
23:58
we're doing them the right way, and the financial services sector, and I want everybody to know this
24:02
is an integral part of delivering for the people of this country
24:07
And that's what we're trying to do. Well, I'm sure there will be lots of fingers crossed in the city
24:12
But Minister, thank you very much to join us. No problem. Thank you. I hope you enjoyed our latest episode of bonds and ballots
24:17
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24:21
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