I spoke to Robert Wigley on Budget day 2021, ostensibly about the publication of his new book, Born Digital, a call to arms about the effects of technology upon the younger generation and the need for greater awareness of Big Tech dominance.
However, Wigley’s foray into the world of publishing is the just the cherry on top of a long and illustrious career in financial services. Past roles have included chairman of Merrill Lynch’s Europe, Middle East and Africa operations, being a member of the Bank of England board, heading the Green Investment Bank commission, as well as acting as a key player in helping the UK government devise national business strategies. In other words, Wigley has been at the heart of the finance industry for the past two decades.
All of which makes him uniquely qualified to chair the banking and finance industry body UK Finance, which represents more than 250 companies across the sector. Although its members are established financial services companies, the organisation itself is relatively new. It was founded in 2017 through merging a number of industry bodies including the British Bankers Association and UK Payments.
UK Finance hit the headlines in 2020 when its chief executive was accused of historical inappropriate conduct towards a female colleague. With a change of leadership and a mandate to spearhead the industry’s response to the coronavirus pandemic, the lobby group has become the industry’s primary negotiating body with government in delivering emergency financial aid.
What does the 2021 budget mean for financial services?
Wigley is positive about the 2021 budget, despite the current economic turmoil. On Chancellor of the Exchequer Rishi Sunak’s budget he says: “It is the boldest and best-constructed budget since Geoffrey Howe’s first budget under Margaret Thatcher.” Particular measures that UK Finance members will welcome, according to Wigley, include an increase in the contactless payment limit to £45, new low-deposit mortgages for first-time buyers as well as flexible visas for high-skilled and fintech employees.
The banking world changed incrementally over a long period, but the truth is that regulation didn’t keep up with developments in the financial services industry.
Sunak’s proposed review of the aggregate taxes paid by banks in the UK, in the light of planned corporation tax increases, is also a welcome measure. “If you put up corporation tax, you must adjust other taxes so that we are still competitive with Frankfurt, New York and others,” says Wigley.
The measures will help the finance industry in its key role in the economic recovery from the Covid-19 crisis, he adds. The financial services industry has provided £73bn of finance through government-backed loan schemes to almost 1.6 million businesses throughout the pandemic, according to the UK Treasury. The financial aid was delivered to businesses through the Coronavirus Business Interruption Scheme, the Bounce Back Loan scheme and the Coronavirus Large Business Interruption Scheme.
Sleepwalking into the next crisis?
Wigley witnessed, first-hand, the devastating effects of a system in meltdown during the 2008 financial crisis – in his own words, “calling out the coming crisis” while a serving board member of the Bank of England. Born Digital is essentially drawing a lesson from this experience of watching the world ‘sleepwalking’ into yet other crisis – whether it be the dot.com crisis, the financial crisis, the climate crisis or the current Covid-19 crisis. While the economic and health challenges of Covid-19 continue, Wigley is one step ahead in sounding the alarm about this new looming crisis.
The ‘distraction crisis’, caused by the unfettered dominance of Big Tech on the collective psyche of the younger generation, is a disaster in the making, he believes. “The banking world changed incrementally over a long period, but the truth is that regulation didn’t keep up with developments in the financial services industry,” says Wigley. Big Tech has grown at a much more rapid pace, he adds, and regulation is lagging and in need of an urgent reset.
When you make individuals rather than corporates accountable, you really get a changing cultural attitude very fast.
He cites the conclusion drawn by the US Senate Committee on Antitrust in December 2020 that there hasn’t been a such concentration of power in companies since the days of the oil barons in the early 20th century. The committee singled out Facebook’s acquisition of Instagram and WhatsApp, and Google’s acquisitions of YouTube, DeepMind and Waze, as examples of this concentration. Wigley is hopeful that the Biden administration will tackle the issue of Big Tech accountability, with a number of planned measures already under way.
History suggests that self-reform of Big Tech is unlikely. Regulation is therefore vital. On this point Wigley believes the UK government deserves credit for proposing the Online Harms Bill in April 2019, which he says is genuinely world leading. Wigley hopes the bill will not become diluted throughout the parliamentary process and believes strongly that holding individuals to account rather than companies is crucial.
“When you make individuals rather than corporates accountable, you really get a changing cultural attitude very fast, especially with Big Tech because it is all about the founders, and if you get the impression that they are really leading at the helm,” he says. Again, he refers to the financial crisis after which the Senior Managers Regime was introduced to deter individuals’ misconduct by improving accountability.
Regulation and protectionism in FDI
The reluctance of the UK’s Department for Digital, Culture, Media and Sport to include senior executive accountability and fraud in the Online Harms Bill on the grounds of global competitiveness is a mistake in Wigley’s view. “These companies are among the few who have actually benefitted from Covid,” he says. “Their profits have risen dramatically, so to impose some new responsibilities to take appropriate action to protect consumers of their products and services, and to support the government’s fight against fraud, seems to me entirely appropriate.”
Wigley believes a two-pronged national and supranational regulation regime of Big Tech is the only practical solution. “The idea that you could have one global law that would suit everyone is not realistic,” he says. Instead, he recommends a set of high-level principal aims and objectives set by the UN’s Internet Governance Forum alongside national laws, which bring in the detail and take account of different cultures and histories.
I am optimistic about the potential for financial services in the UK, provided the government works hard to put in place a regulatory regime that is fit for purpose post Brexit.
He firmly believes greater national level regulation would not stop companies such as Facebook or Google investing in the UK. “It is such a big market that you would have to do something quite dramatic to cause them not to invest in the UK,” he says.
Another huge issue facing the UK at this time is that of Brexit, with the country now formally separated from the EU. The belief that the UK is too important to invoke the distain of other countries on the matter of investment is a view that some of Wigley’s colleagues at Downing Street hold fast to. UK Finance lobbied and advised the government on behalf of its members in the final stages of the Brexit negotiations with the EU.
Wigley is more optimistic about Brexit than he is about Big Tech. “In the medium term I am optimistic about the potential for financial services in the UK, provided the government works hard to put in place a regulatory regime that is fit for purpose post Brexit, and to put in place a compelling vision for financial services,” he says.
Regulating a free market
The irony of a lifelong free market capitalist calling for more regulation is not lost on Wigley. How does he square this? “Very simply, because free markets are not perfect,” he says.
“Free markets are a brilliant mechanism for allocating resources on a day-to-day basis, but they can result in market failures and, where they do, regulation has to step in. And here, I think we have some pretty major market failures.”
Wigley makes an estimate of the financial cost to business of the distraction crisis. If every worker spent just one hour less per week on their phones and tablets when they should be working, the increase in working hours could create an extra £58bn in GDP for the UK. In 2017, Deloitte estimated a cost to employers of between £33bn and £42bn from ‘presenteeism’, where individuals are less productive due to poor mental health. According to a 2017 government review of mental health and employers, the estimated cost of poor mental health to the economy is between £74bn and £99bn.
In Wigley’s opinion, the lack of accountability for content on Big Tech platforms is the biggest free market failure to date. “[Big Tech companies] are providing products and services which cause potential harm to their users, particularly children,” he says. “And so far, we haven’t got legislation to compel them to take responsibility for that harm, but it is coming.”