Fresh appetite for risk can help arrest Britain’s downward spiral, think tank says

Britain’s decade-long downward spiral could be reversed with a new appetite for risk that could help boost annual investment by a needed 100 billion pounds ($131 billion) in next decade, a leading think tank announced on Friday.

In a 2014 review of banking and financial regulation, New Financial said a culture of risk aversion in regulation and financial services since the 2007-2009 credit crisis had spread to the wider economy and stifled investment.

In 80 percent of the stocks it examined — after tracking activity in the stock and bond markets, bank loans, private equity, pensions and investments, and the economy as a whole — growth in activity was less than in the U.S. United, he added.

“The UK economy needs more, not less, risk in the system,” it said.

“The paradox is that in seeking to reduce risk, regulators have created greater, long-term risks elsewhere. Allowing investors and market participants to take a little more risk could help create a virtuous circle of investment and growth.”

New Financial did not lay the blame for the relatively poor performance of the banking, financial and capital markets solely at the feet of the market regulator the Financial Conduct Authority (FCA) and the Prudential Regulation Authority (PRA).

It noted that the FCA’s budget had grown by just 5% in real terms over the past decade and that average pay at the FCA and PRA had fallen in real terms by a quarter as staff tried to do an “almost impossible” job, which included positions. -Brexit reform.

It also urged the new Labor government, which will publish its first budget on October 30, to speed up plans to reduce regulatory duplication, allow watchdogs to take risks without fear of occasional failures, reset values ​​through that report growth targets and avoid political interference.

The FCA said it welcomed the feedback and recognized the need for a discussion on changing risk appetite.

“To support competitiveness, since July we have revised stock market rules, proposed new disclosure requirements, are reviewing commercial insurance regulations and working with government to drive innovation in the financial advice market,” a spokesman said.

($1 = £0.7652)

(Reporting by Kirstin Ridley in London; Editing by Matthew Lewis)

Photo: A general view of the financial district skyline is seen from the River Thames in London, Friday, Nov. 4, 2022. (AP Photo/Kin Cheung)