During a recent address at Warwick Business School, Kate Collyer, the chief economist at the Financial Conduct Authority (FCA), discussed the UK’s financial sector’s decade-long productivity stagnation. Furthermore, she voiced concerns about the UK’s underwhelming economic growth post-financial crisis.
Collyer underscored the urgent need for financial regulation that bolsters the country’s economic growth. She urged regulators to recalibrate risk to foster innovation, which in turn, could stimulate growth and productivity. Given the right balance between risk and innovation, she believes the UK’s financial sector could potentially serve as a catalyst for the national economy.
She pointed out various methods to assess productivity and economic growth, each offering a unique viewpoint. Yet, regardless of the measurement techniques, the truth is that growth has been painfully slow since the financial crisis. This predicament necessitates a comprehensive and innovative strategy to enhance productivity and spur growth.
Rebalancing Risk: A Key to Unlocking Growth
Collyer proposed a risk rebalancing to unlock the UK economy’s growth potential. She contended that the financial sector’s excessive focus on risk prevention might have unintentionally quashed innovation. Therefore, a shift towards a more balanced risk approach could set the stage for innovation to thrive.
Collyer stressed that fostering innovation requires a regulatory environment receptive to new ideas and methodologies. She urged regulators to adopt a more progressive attitude and promote innovative practices within the financial services sector. She believes this approach could ignite productivity and accelerate the UK’s economic growth.
Furthermore, regulators need to ensure the regulatory environment remains sturdy and trustworthy. This will instil confidence in investors, consumers, and businesses, prompting them to engage more actively with the financial services sector.
Collyer’s speech underscores the pivotal role of financial regulation in bolstering the UK’s economic growth. It provides a fresh outlook on how the financial sector can break free from productivity stagnation and contribute more effectively to the national economy.
