The UK and Germany both have large economies with certain strong sectors. Germany flourishes with a strong car industry. The UK flourishes with a strong financial sector.
There the similarities end. Germany does everything possible to back and support its car industry. The UK has spent the last seven years exposing the faults and defects of its banks, and hurled many accusations against them.
I fully understand the unpopularity of banks, and have no time for malpractice or bonuses paid to senior executives who have actually made losses for the shareholders. I opposed the bank bail out purchases of shares by the Labour government. If offences have been committed then the perpetrators should be dealt with by the law.
I do think now the hostility to banks has gone too far. There are many decent, hard working people working for banks. Our banks are involved in and facilitate practically every transaction that keeps our economy going. We need successful commercial banks to lend sensible amounts of money to individuals and companies to fuel our recovery. We need a strong globally competitive banking industry based in London to sustain our balance of payments and tax revenues, which have in the past depended on the financial sector for a large contribution.
It is currently fashionable to attack the top end business of banks because they supply expensive services to rich individuals and companies. In this they are in exactly the same place as the German car industry, which specialises in making expensive cars for the rich and for companies. The German government does not go on a moral crusade telling their high end car producers they should make fewer dear vehicles for people who already own cars and who by definition do not”need” the latest high priced product. The German government does not even take very strong action to cut the average CO2 emissions of the vehicles made by the German industry, although it is signed up to global warming worries.
The German car industry should affront all Greens and people with left wing ideas. It consumes large amounts of natural resource, uses big quantities of energy in making the product, and sells machines which are relatively fuel intensive in use. Some people dare to own several cars, though they can only use one at a time. The government subsidises energy for industrial use in Germany, conscious that EU energy policies are damaging to industry without subsidy. The German administration seems to take the sensible view that what is good for the car industry is good for Germany. Selling more cars to the rich creates more jobs for German workers.
The UK recovery has been impeded in past years by the regulatory demands that the banks should hold much more cash and capital. As someone who said the banks should hold more capital and cash prior to the crash, I see the wisdom of demanding good standards to ensure liquidity and solvency. I think the regulators have now done enough, and should allow more lending by banks. There are many good projects and investments that could benefit from more long term loans. The regulators should ask themselves how much more is it wise to take from the banks in fines and compensation demands for past mistakes? If they fine too much the banks will be able to lend less and will be looking for additional ways to put up fees and prices. When the government comes to tax banks it also needs to ask how much more can it afford to take out?
We read that HSBC is considering leaving London to establish its headquarters in Hong Kong. There are a variety of reasons given. If none of the reasons are tackled they might go.There is the bank levy which is charged on non UK activities as well as on UK ones.There are the higher capital demands from the EU and the Bank of England limiting the ability to lend and to earn a good return, when the bank is a strong one with plenty of capital already. There is the move to segregate regular banking from investment banking. There is the EU control on bonus payments. Taken together these are leading some to argue that HSBC should take its headquarters away from London and from the EU. I think it is time to reconsider, and to create a climate where large and successful banks are willing to base themselves here. If we lose too many of our major financial companies, we will lose tax revenue, sales revenue for exported services and spending power in our economy as well paid executives go elsewhere.