Alex Gurr: Hi everyone and welcome back to our first FS in Focus for 2024. 2024 is already turning out to be one for the history books with 64 countries plus the European Union set to hold elections this year, meaning that nearly half of the world's population will be taking to the polls. So we wanted to dive into what that means for the financial services sector and particularly in the US and the UK markets. And for that I’m delighted to be joined by Sarah Ashley, Partner in our Government practice, to do just that. So welcome Sarah. It's great to have you here.
Sarah Ashley: Really excited about our conversation Alex.
Alex Gurr: Brilliant. So let's start with a really easy question. When are we expecting a UK election?
Sarah Ashley: Everyone's working to three different scenarios, a May election which would coincide with the local elections, and we'll know about that pretty quickly. We'll know by the middle of March. The default expectation is an October election before the US go to the polls, because we don't like to have both countries in an election state at the same time. And of course, we’ll definitely have an election by January 2025. So, it is shaping up to be an exciting year ahead.
Alex Gurr: And what is it that the main UK parties are saying that might be useful for our FS clients?
Sarah Ashley: Well, neither party have published their manifesto yet, but they will come soon. But they are trailing some of those things. We’re beginning to get a sense of what's there. For Labour, it is a real focus on driving growth forward and they very much see the city and financial services institutions at the heart of this. We're not expecting to see any major changes in regulation or higher taxes, but we are definitely seeing a focus on a couple of key areas. Innovation, so how can you use investment to drive innovation and for example, using pension funds to drive innovation and investment in the UK, and also the kind of green agenda, ESG and infrastructure as a driver for investment and growth. So that's really important from a Labour perspective. From the Conservatives, we've seen less about business at the moment because they're still very much focused on these five key pledges and stopping the boats, which is really at the forefront of all of the things they're talking about. But we will expect them to do something. We know they've just announced their Mansion House reform, which again is around innovation and investment, using 5% of investment to drive innovation. That will stay and we know that the Labour Party is also supportive of that. So I guess the key themes across both of them is around innovation for investment to drive growth in the UK economy. And it's great to see both parties engaging with the city across various business conferences, sounding. So we can be confident that those ideas and thoughts are getting through to both parties, which I think is a really valuable thing.
Alex Gurr: And have you got a view on what the likely outcome might be?
Sarah Ashley: Difficult question. Obviously, the best place to look is at the bookies and the pollsters who are all pointing to a Labour majority. So I think I'll stick with, we’ll go with where the bookies and pollsters are saying, but I've probably done a lot of general elections
now, so I'm not so sure.
Alex Gurr: And if you were a leader of an FS institution, what would you be thinking about right now with that in mind?
Sarah Ashley: Three key things: you can be confident that the regulatory landscape is not going to change too much, that is great. You should definitely be thinking about innovation through your investments and you should definitely be kind of keeping your eye on green and infrastructure. Now, we know the Conservatives have backed away from some of that and the Labour announcement around dropping their £28 billion pledge would suggest that they are not so in tune in it. But we don't believe that to be true, we really know that green infrastructure is a real key driver for growth because we're looking across the pond at the US and seeing the impact of the IRA. I wonder, Alex, you’re the FS expert, are these themes that you're talking to your clients about?
Alex Gurr: Yeah, I mean that really resonates. I think certainly regulatory stability is something that we are seeing. I mean, there's obviously ongoing focus on risk management and controls, financial resilience, operational resilience and data risk as well. But we're not seeing anything that would suggest dramatic changes in course from either party at the moment.
Sarah Ashley: Yes, almost like business as usual?
Alex Gurr: Hope so. And Sarah, considering that half the world is going to go to the polls in the year ahead, what are the potential implications of other elections and particularly, I suppose, the US election in the year ahead?
Sarah Ashley: Yeah, let's start with the US election because that probably has the biggest impact on the UK and there are two possible outcomes there. Let's start with a Trump presidency. The main aspect we see there is a real increase in defence spending both for the UK and for other European governments, that is going to have to be funded probably out of higher taxes and that will have a knock on impact into the economy and into financial services institutions. Separate from the defence spending, with Trump it’s actually quite difficult
to know what will happen. Previously there was a lot of trade protectionist policies. Maybe those will happen again, coupled with quite a lot of deregulation. Those two things sometimes conflict. And therefore it's really difficult actually to say what might be some of the impacts on different institutions. If we set aside America and look at Europe, we've also got a number of elections happening in Europe this year, both in individual country level and in the European Parliament level. And again, we're seeing that tension between the right wing populist parties and the more central liberal environment that we’re used to. Again, it's sort of similar to what we're seeing in the US. We may see more nationalism if we move towards those populist swings, and then the UK may become a place of safe haven because our regulatory landscape is actually rather settled now after Brexit. And if we say stay more in the centrist space, it will look like more of the same. So actually, Alex, I don't think I’ve answered your question. It's actually a really complicated landscape that we head into. I mean, it is a really complicated landscape and there's obviously a lot of change ahead.
Alex Gurr: Sarah, that's been brilliant. Thank you so much for your insights. So my key messages for financial institutions, scenario plan. Make sure you scenario plan any emerging risks from different election results in your key operating geographies. Consider both the macro impacts on trade, regulation, the markets that you operate in, as well as micro impacts within your organisation, your customers, suppliers, employees and stakeholders. If you'd like to discuss any of this with us further, then please do get in touch. But for now, that's all we have time for today. And we’ll see you next time.
