Britain needs a new economic revolution just like the industrial revolution.
Britain cannot be a strong country without a strong economy, and it cannot have a strong economy while holding back the people and the institutions that generate investment, jobs, growth and wealth for our country.
Our economy has stopped generating the growth needed to fund defence, public services and a decent standard of living. It is not government that creates growth, it is business.
That's why we have published our plans to restore London to an economic powerhouse.
Watch Kemi’s speech to find out more 👇:
Read more about our plan to deliver a New Economic Revolution here.
And Read Kemi's full speech below:
Many of you have met my Shadow Chancellor, and I think you have also met the Shadow Business Secretary, Andrew Griffith, and the Shadow City Minister, Mark Garnier.
All of them are doing a fantastic job.
I am very grateful for the strong and united team I have.
So the last time I spoke to City UK was in April 2024, when I was the Business Secretary.
A lot has changed.
Then, people were very excited about Rachel Reeves, the first ever female Chancellor, and what she would do.
And I said to you that day that we should be worried.
Because the Shadow Chancellor, as she was then, said that her economic inspiration was Joan Robinson.
For those of you who have never heard of Joan Robinson, she was a Maoist.
And yet, such was the disillusionment with the Conservative Party that people still felt Labour was a better option.
The consequences of Conservatives being too scared to champion the City.
Afraid of talking about wealth creation, feeling guilty about non-doms, handing the reins over to regulators to avoid making tough choices.
The consequences were a Labour government with a huge majority and no fear of following its worst instincts.
Economic vandalism was not the aim.
It was just the inevitable result.
The combination of past Conservative timidity and Labour’s politics of envy is the highest tax burden in our history.
A government paying more to borrow than at any time since the 1990s.
Jobs disappearing and public spending so out of control that the government, according to its own Cabinet ministers, cannot perform its first duty to defend the country.
Labour are so excited about the by-election in Makerfield today.
But it does not matter who is in charge of Labour if it is the same failed economic policy.
But I am not here to talk about them.
There is plenty of time for me to criticise, especially at PMQs.
I am here to talk to you about the scale of what we are going to have to do to reverse Britain’s economic decline.
Solving these problems is going to be a bigger challenge than we faced in 2010.
Bigger even than the one we faced in 1979.
Collapsing birthrates and an ageing population.
Weaker energy security than at any point in our country’s history.
Increased threats from Russia, Iran and China.
Papering over these cracks has only made the situation worse.
We now spend more on debt interest than we do on education.
One and a half times what we spend on defence.
Taxes are crushing every last drop of entrepreneurial spirit from this country.
And using immigration as a productivity quick fix has failed.
To solve these problems, we are going to have to do a lot of difficult things, and in a world moving this fast we are going to have to do them incredibly quickly.
It can be done, but we will need to be bold.
We will need an economic revolution.
We need to create a high-growth, low-immigration economy.
And to do this, we need the City to be an economic powerhouse.
Britain needs £800 billion in new funding just to meet our defence commitments over the next 15 years.
Without you, there will be no new defence start-ups.
There will be no beefed-up critical supply chains.
There will be no new or growing businesses, and there will be no new jobs.
Where do the new businesses come from?
The Alternative Investment Market is the pipeline for companies of the future.
Yet the number of listings worth over £1 billion on AIM has fallen by 50% in the last year alone.
For this economic revolution to succeed, we are going to need the City to do more than it has ever done before.
Now, I am not the first politician to make the case for growth.
In fact, in the last 20 years pretty much every major political leader, except maybe Jeremy Corbyn, has talked about the need for growth.
Labour mentioned the word “growth” more than 50 times in their manifesto.
But when you listen carefully, I do not think Labour really know what growth means.
They think it is something magical, and when nice people like them say the right words and click their heels three times, growth just appears.
The reason I am different from Labour and Reform UK is that I know it is not government that creates growth.
Businesses create growth.
Government should create the conditions for growth and then get out of the way.
But I am also different from Conservatives that you have seen before.
The last Conservative manifesto said “Clear Plan, Bold Action” on the front.
We do need to be bold, but what was inside?
Twenty-four mentions of reviews, consultations and things we would consider.
I think we can all agree that “Vote for us and maybe we will think about it” is not a clear plan, it is not bold action, and, as it turns out, it is not a vote winner either.
I wanted us to go further then, and now I am in charge we are going to go further.
We are going to deliver the economic revolution that you want and this country needs.
Previous Conservatives did try to tackle low growth in government.
Some ideas worked, many did not.
They did not work because there was not enough clarity of thought about what we were doing, and we did not stick to first principles.
Growth cannot be willed into existence.
You need to get to the bottom of why the UK has been failing on growth for 20 years.
My new Conservative Party has spent the last 18 months analysing what went wrong.
I am not interested in making excuses for past mistakes.
I am interested in making Britain the greatest place in the world to do business.
I do not need to tell you about the problems facing the City.
You already know.
Let us remember, the City is one of Britain’s greatest assets.
The powerhouse of our economy, generating the tax to pay for the entire schools, policing and roads budgets all on its own.
It employs more people productively than any other sector.
But it is losing its comparative advantage.
It is now more heavily taxed and more heavily regulated than our competitors.
London has lost a quarter of its listings over the last decade as companies have moved their headquarters elsewhere.
We have fallen out of the world’s top 20 for new listings.
More companies were listed in Mexico and Oman than in London last year.
The City is not failing Britain.
The City is sending a signal about Britain.
Investors are reacting rationally to policy failures which have made London less attractive.
Investors think the UK is uninvestable.
Britain has the highest energy costs in the developed world.
We are smothered in red tape, from Labour’s Employment Rights Act to planning constraints that make it a nightmare to build anything here.
We are facing skills shortages.
I could go on and on.
Back in the 1990s, 20 to 30% of domestic pension and insurance capital was invested in UK equities.
Companies based here, helping to grow our economy.
Today, it is less than 5%.
Rachel Reeves’ solution is to force pension funds to invest here.
This makes no sense.
If you want to fix capital allocation, first fix investability.
If energy is expensive, planning is slow and tax is uncompetitive, then ministers are essentially forcing UK savers to stomach lower returns to bail out the government’s policy failures.
And pension funds are not the only ones finding better returns outside the UK.
More than 80% of FTSE 100 revenues, and 50% of FTSE 250 revenues, are derived from outside the country.
So even the companies which are listed here are not finding value in the UK.
By comparison, only 40% of the revenue of the S&P 500 is generated outside the US.
The solution is not mandation, as Rachel Reeves wants.
It is making Britain worth investing in again.
But you already know this.
It is the political class that needs to understand.
I want you to know that I get it.
So what do we do about it?
We could try to fix these problems with a hundred different sector-specific schemes.
Scores of people working in silos, conducting review after review, consultation after consultation.
But that is the old way of doing things.
A new Conservative government under my leadership is going to do things differently.
We are going to do five things that will drive growth in every sector of the economy.
Five things.
First, we are going to bring down the cost of energy that is forcing Britain to deindustrialise.
Energy is growth.
Without cheaper energy, we will never, ever build anything here.
That is why we are scrapping the Energy Profits Levy.
That is why we are scrapping the carbon tax.
That is why Conservatives are backing new drilling in the North Sea.
Second, we will bring back flexible labour markets, so businesses feel confident hiring people again.
That is why we will be removing every job-destroying measure in Labour’s Employment Rights Act.
No other intervention will deliver more opportunities for young people.
Third, we are going to cut the taxes holding back the economy.
We will scrap business rates for most of our high street.
We will scrap the Family Farms and Family Business Tax.
We will abolish stamp duty on people’s homes.
I want to reduce corporation tax.
I want to reduce employers’ NI.
I want to reduce capital gains tax.
But as with all our tax cuts, they must comply with the Conservatives’ Golden Economic Rule, which is that for every pound we save, at least half will pay down the deficit.
We have to stop spending so much money on debt interest.
If you can help us find the savings to cut these taxes, get in touch, because we want to do it.
Fourth, we are going to undertake a once-in-a-generation clear-out of the regulatory clutter blocking the way and bring down the costs to business.
We will scrap ESG reporting, reform IR35 and get rid of diversity and inclusion reporting for financial services.
We will remove the Zero Emissions Vehicle mandate that is destroying the car industry.
We will scrap the Climate Change Committee that is forcing people to rip their boilers out even when they cannot get a heat pump.
And fifth, and finally, we are going to stop being afraid and properly back business.
We will champion the small businesses, family firms, major employers and investors who take risks, create jobs, support communities and get Britain working.
But what does this mean for you?
After the financial crisis, the City was treated as a problem to be managed rather than an asset to be championed.
As a result, it has suffered.
Politicians decided to make an example of the City.
And more than any other nation in the world, Britain tried to remove all risk from our financial markets.
For nearly 20 years, government has been aiming for a zero-risk environment.
The problem is that there are two sides to the risk equation.
If you eliminate risk, you also eliminate reward.
You eliminate opportunity.
You eliminate innovation.
You eliminate growth.
Every great enterprise was built on risk.
The desire for a zero-risk environment means Britain’s financial services sector is now more regulated than any other major market in the world.
It is cheaper and easier to do business elsewhere.
The rest of the world is eating London’s lunch.
Politicians wanted someone else to take the tough decisions, so responsibility for managing risk was delegated to risk-averse regulators.
And because these regulators are incentivised to avoid risk at all costs, your costs, they only ever go in one direction.
New regulation is easy to add but difficult to remove.
This unbalanced equation, regulation piled on one side and rarely removed on the other, has seen headcount in the financial services sector for compliance, legal and audit triple since 2009.
The cost of compliance is staggering.
According to the CEO of Marsh McLennan, it costs six times more to comply with regulation in the UK than any other country they operate in.
Even Andy Haldane, former Chief Economist of the Bank of England and “arch-hawk” of British regulation after the financial crisis, said this weekend that we need to take a chainsaw to regulation.
Andy has gone all Javier Milei.
He says Britain needs to “unleash our animal spirits”.
This is Andy Haldane.
What are we waiting for?
It is not just regulation.
UK businesses now face higher effective tax rates than almost any of our international rivals.
On the International Tax Competitiveness Index, which is a mouthful, by the way, our competitors in New York are 15th, in Amsterdam 16th, in Frankfurt 20th, and in London we are 32nd.
And governments have made huge mistakes, like Gordon Brown removing the dividend tax credit for pension funds, which has driven capital out of UK equities.
Pension funds, insurance companies, banks and private investors have all moved away from investing in UK businesses, and instead are choosing to put their money in government bonds or foreign equities.
No wonder we are facing a projected shortfall of £150 billion in productive capital by 2030, or that 70% of businesses trying to scale up in the UK cannot access the capital they need.
So I told you about our five-point plan.
The element most pertinent today is cutting red tape and backing business.
Let me show you the work we have been doing.
Take bank ring-fencing, which forces big banks to separate their retail and investment arms.
After five retail banks had to be rescued by taxpayers, you can understand that the priority of government was to prevent any more bailouts.
But since ring-fencing was introduced, the Bank of England has expanded the Resolution Regime to take the risk of failing banks away from the taxpayer.
However, the UK is the only country in the world where ring-fencing is still in place.
This out-of-date regulation adds duplication to banks’ activities, stops them from buying equities and keeps money from businesses that are hungry for capital.
So today I can announce that a future Conservative government will end ring-fencing.
But that is not all.
After the financial crisis, you can understand why regulators wanted banks to hold more capital.
But over time, they did not just increase capital requirements once.
They added buffer after buffer after buffer.
A basic safety buffer, a countercyclical buffer, extra systemic buffers for the biggest banks, a PRA buffer on top.
Different regulators, at different times, trying to solve the same problem.
The result is a system where the cumulative burden is greater than anyone intended.
In fact, large UK banks now hold significantly more capital than even the Bank of England’s own benchmark.
We are more restricted than even the EU.
This is not what Brexit was meant to do.
Hundreds of billions of pounds that could be supporting mortgages, small businesses and investment are instead sitting idle on balance sheets.
So I can announce that the Conservatives are going to bring capital requirements back in line with our competitors.
We expect this to release up to £450 billion in capital and bring down the administrative costs facing banks.
So that is ring-fencing scrapped, capital requirements fixed, and a third problem we are going to sort out is the Financial Ombudsman Service.
My team have spent 18 months talking to people across the financial services sector, and time after time we have been shown that the Ombudsman is pushing the boundary of responsibility for financial losses.
Caveat emptor has been forgotten.
The Ombudsman’s test is not always “fair and reasonable”, and all it has led to is more and more products being removed from the market, except for the richest customers.
So we will replace the Financial Ombudsman Service with a new independent body.
It will look at the facts and apply the law rather than retrospective and subjective judgement.
This will create legal certainty for firms and make investment in UK financial services more attractive.
A new economic revolution is not just about addressing a list of individual problems.
What has been missing across governments of all colours is a clear, top-down strategy.
A strategy that answers two fundamental questions.
First, where does responsibility sit between the state and those who participate in markets?
And second, how do we build a system where the rules are clear, regulators are accountable and success is judged by whether markets actually work, and not by how much process we create?
Because without clarity on those two principles, we will continue to layer reform upon reform, fixing one issue only to create another.
That is why what we are setting out today is not simply a collection of policy changes, but the beginning of a more serious, more honest framework for regulatory reform.
The problem is not just policies.
It is culture too.
As you all know, culture eats strategy for breakfast.
Some people like to call me a culture warrior.
Well, I am going to fix the culture.
The culture of regulators.
The culture of the Treasury.
The culture of risk aversion.
The culture of consultations about consultations.
The culture of uncertainty.
The culture of government assuming that every problem needs a new rule.
This will be an economic revolution.
Because we are going to sweep this culture away.
The booklet I have published alongside this speech shows you the level of detail that we are going into to solve your problems.
And these changes are just the start.
Unlike other parties, we do not make commitments without a plan.
Britain stands on the cusp of a new technological age driven by AI, quantum computing and blockchain.
Technology is where we have many strengths.
If we get this right, the next 20 years of our country’s history could be an era of economic revival.
We may have just one chance.
If we miss this opportunity.
If we continue to squeeze every last drop of enterprise out of this country.
By taxing and nationalising and running away from our problems.
If we continue to fund things by robbing Peter to pay Paul.
Rather than prioritising economic growth.
We will go bankrupt.
As Ernest Hemingway said, “Slowly and then all at once.”
The perils that we face in the world, the global competition for resources and the complexity of the age that we live in are going to require a revolution.
The economic revolution that I am talking about needs to be bigger and better than the Big Bang.
So the work we are doing goes beyond the City.
But we cannot do it without the City.
That is why I am launching it here with you.
At the next general election, we will stand on a platform to reverse Britain’s economic decline.
This is a war effort.
It is going to need every business, every worker, every investor and every part of our country to step up and play their part.
If you agree with me, please say so publicly.
There is no point just nodding in the room or sending me a WhatsApp.
Because people out there do not hear it, and if you do not say so publicly, what you are going to get is a lot more of what Labour is serving.
Please speak up.
Just as it has been in the past, the City can be a hero in Britain’s story.
Facilitating the free flow of capital to every corner of the country.
The City should be the engine room, powering thousands of new and growing businesses.
I promise you that I am going to create the conditions that will bring growth back to our country.
And Conservatives are the only party that truly understands and champions your role in that endeavour.
We will embark on a new economic revolution.
We will restore incentives for risk-taking.
We will drive capital into growing businesses in Britain.
We will harness the power of the City.
We will deliver a stronger economy.
And we will get Britain working again.
