IFCs Can Play A Valuable Role In Building Global Britain

For some, separating from the EU bloc risks leaving Britain isolated and without companion.

For others, it removes the shackles and creates an opportunity for Britain to plough its own furrow as a global player and a key independent G7 member. The reality is probably somewhere in the middle.

However, there are good reasons to believe that the idea of a Global Britain is not too fanciful – and IFCs that have strong ties to both Britain and Europe should be alive to what a ‘global Britain’ could mean for them.

In a post-Brexit landscape, Britain can expect to retain certain advantages that have helped it up until now become a top  10 global economy.  It will remain an attractive investment destination, for instance, and it will still have soft political power – being a leader in academic prowess, bioscience, digital innovation, academic excellence, and financial services.

It's why the idea of 'Global Britain' seems a realistic and achievable vision – a vision put forward in Robin Niblett's Chatham House research paper ‘Global Britain, global broker’ (Chatham House, 2021). In that paper, Niblett sees Britain as a global influencer, shifting from being a part of the EU supporting cast to a worldwide interlocutor, stimulating trade and investment, offering stability and international capabilities.

It's a vision that acknowledges Britain's inherent strengths and that points to shifts in trade patterns and wealth creation from west to east.

And it's also a vision that should carry meaning for IFCs, particularly the Crown Dependencies and Overseas Territories (CDOTs), with the journey to achieving Global Britain status not set to be an easy one but where they could play a pivotal supporting role.

As well as there being strong historical ties that bind the CDOTs with Britain, they also have a shared interest in seeing Britain succeed. Their experience in facilitating global trade and their unique expertise have the potential to be the foundation for a reciprocal, beneficial and even closer partnership in the future.

Global Ambition

Reflecting that Brexit has consumed Britons and the British psyche almost entirely over the past five years, whilst the rest of the world has continued to move on, Lord Hague of Richmond recently wrote for Policy Exchange that Britain is now at a "moment of reckoning" (Making Global Britain Work, 2019).

It’s an acknowledgement of that fact that, if the vision of 'Global Britain' is to succeed, Britain must be proactive in building a platform to launch its new global ambition.  And it’s a holistic platform - trade horizons will need to be reset, partnerships will have to be forged, and relationships deepened in new and existing markets worldwide.

The global opportunities are certainly there – as HSBC's Navigator (‘Navigator: Now, next and how for business’, HSBC, 2020) report indicates, there is positivity around the potential of international trade in 2021. However, the landscape is becoming more complex as supply chains transition to an intra-regional focus.

The indications are that in 2021, we will see a sustained focus on the Asian recovery. It’s a region that has seen a strong resurgence from the pandemic, reflecting its experience in managing past episodes.

In addition, recent moves by certain Asian governments to relax foreign ownership rules and promote inward investment will inevitably result in more significant capital flows, with foreign capital set to be critical to Asian economies as they look to rebuild. Consequently, there will be real opportunities to support that investment across the Asian markets - with many in that region shedding the 'emerging' label, as they increasingly provide stable, mature and sustainable returns.

Supporting that growth trajectory, according to the Boston Consulting Group, assets under management for Asia-Pacific (APAC)-focused funds grew at an annual rate of 31 per cent from 2015 through 2019. That trend looks set to continue as APAC economies jump start in the wake of  COVID-19.

It stands to reason that exploring ties with the APAC region will be pivotal for Britain - which is why the treaty signed with Japan and the recent deals with Singapore and Vietnam are so significant.  They fit into a broader strategy of expanding trade and foreign policy ties in the Indo-Pacific region. In addition, Britain is also seeking to join the 11-member trade bloc, the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP).

Meanwhile, the US, an essential trading partner for Britain, also looks set to bounce back in 2021.  With the US continuing to score well in terms of ease of doing business, the US will remain a key location for start-up businesses, while the Americans will continue to reassert their global role. A change in Presidency will also play out - President Biden will revive relationships between the US and international bodies such as the  World Trade Organisation and EU, strengthening the US appeal as an investment destination and growth market.

Deploying Capital

Also providing scope for British optimism is the fact that private capital looks set to play an essential role in global economic recovery - especially given Britain's strength as one of the largest international investment hubs for families and private investors, as well as institutional capital.

Figures suggest that private capital is ready to be put to work as economies deal with massive national and personal debts (which rose to an estimated US$257 trillion in 2020) and a pressing need to rebuild infrastructure, businesses and communities presents itself (‘Global debt shattering records’, Reuters, January 2020).

Recent General Partner Private Equity surveys have confirmed that deploying capital in 2021 is the main priority for managers.

Britain can play a crucial role in providing this much-needed investment, with European private equity deals expected to pass the €480 billion mark this year (Pitchbook).  Add to this the significant numbers of substantial family-owned business in APAC becoming more receptive to private capital (‘The Promise for Private Equity in Asia-Pacific‘, BCG, August 2020), and the opportunity is both clear and meaningful.

Opportunities

The global role being put forward for Britain in this new landscape might sound very familiar to IFCs – being a neutral, independent, global broker facilitating international trade and flows of capital is really the bread and butter for IFCs, they are experts at it.

However, despite the apparent opportunity in markets worldwide, Global Britain's route won't be easy, and the world today is very different from the world in 2016 when the referendum took place.

COVID-19 has dealt a significant blow to the world economy; China's relationship with global markets is more complex; the US dynamic continues to evolve; and geopolitical competition is increasingly heated.

This backdrop is exactly why the route to achieving Global Britain is so pertinent to the CDOTs as IFCs. They have a real opportunity to support the Global Britain vision - because as investment facilitators, they are almost uniquely experienced in navigating global complexity. Fully aligned with the new post-Brexit era, they are ideally placed to support and complement Britain's aspirations.

The CDOT IFCs are agile, they have the digital capability, and they are hotbeds of innovation.  They have already embarked on global strategies, with experience in managing and facilitating cross-border flows.  They are stable – a rare commodity in today's geopolitical environment – and have tried and tested rule-of-law, strong anti-corruption measures, and stable democracies.

This supportive role should result in a win-win for Britain and its new partners around the world, with IFC activity typically deploying investment into the real economy – offices, infrastructure, businesses, real estate.

That's a powerful proposition reputationally too, with Britain and the CDOTs working together and playing a crucial role in global economic recovery.

Rational Assessment

It is all too easy, against a rising tide of citizen journalism and social media noise, to be swayed by hubris, and that applies equally in the case of Brexit. A more dispassionate, rational assessment of the evidence points to a positive future.

There are strong arguments for Britain to be confident about its global ambitions, the same arguments that have propelled it to 6th place in the world economic rankings. The British family of IFCs can play a valuable role in helping Britain achieve its international goals, through the provision of efficient administration, transparent capital pooling, and the upholding of the highest standards of regulation and good business conduct.

If they can assert that role with confidence and clarity, they can help Britain and the World build back better.

Geoff Cook
Geoff Cook is an experienced Chair and non-executive director. He has led significant business enterprises for more than three decades and helped major international groups to grow and prosper. As a Chartered Director, Geoff has deep knowledge of corporate governance, global regulation, and risk management. He has authored numerous articles and papers on cross border investment and the role of International Finance Centres (IFCs) in the global financial system. Geoff is an Advisor and non-executive director to a select number of Family Office, Private Capital, and Advisory boards. He was appointed Chair of Mourant Regulatory Consulting in 2021 and Chair of Quilter Cheviot International in 2019 to lead and develop the firm's international strategy. Geoff is also Chair of Apex Financial Services (Jersey) Ltd, a leading fiduciary and is presently Chair of the Society of Trustee and Estate Practitioners (STEP) Global Public Policy Committee. He was formerly the CEO of Jersey Finance and Head of Wealth Management HSBC with extensive international cross border experience across various sectors.