Tighter regulation hasn’t strangled the City after all

Is Britain booming? According to the numbers it is. The economy is growing at a decent clip and, fuelled by a low oil price, it looks set to stay that way for at least the rest of the year. Moreover, the CBI has demonstrated that the key financial services sector is taking full advantage of the benign environment. According to its latest survey, the industry is expanding at its fastest rate since 1996 and nearly all the relevant indicators are in positive territory.

There were many who decried the tightening of the regulatory screw in the wake of the financial crisis of 2008. But it rather appears that their concerns were misplaced. The industry might not like it much, but it seems to be flourishing all the same, with only the building societies struggling somewhat.

Another point raised by the survey was that the industry appears to be migrating certain functions away from London, which is not only expensive but appears to be suffering a degree of capacity constraint. That’s to be welcomed. You’ll have heard the phrase “jobless recovery” applied to both America and Europe at times over the past few years. That’s not the case in Britain. But what we do have is a joyless recovery. And that is particularly so if you care to travel outside the M25.

Wages are only now outstripping inflation and it will take years before they catch up to where they were in 2008. Meanwhile, austerity is cutting into key services and having a lasting impact on the quality of life in many areas. Small wonder people scoff at the talk of a buoyant economy.

One of the biggest risks faced by the financial services industry is not posed by regulation: it is created by political instability and in particular the possibility of a British withdrawal from the EU, together with the introduction of rules preventing financial, and other, companies from being able to import skills they can’t (currently) obtain here.