Top City of London executives have raised concerns about the environmental impact of encouraging trade with distant countries after the UK moved closer to striking a tariff-free deal with Australia.
Members of the FT’s City Network, a forum of more than 50 senior executives, backed the UK’s push to open up its borders to trade from around the world, as well as bring in new sources of overseas finance such as sovereign wealth funds.
James Bardrick, UK chief executive of Citigroup, said the UK needed to stay open to “transparent and responsible” foreign direct investment from both private and public sources, as well as “open on trade and services, and open to new markets, talent, ideas and innovation”.
But there were questions raised about the long-term consequences of both policies, which are central to the UK’s attempt to reposition itself as a hub for global trade and investment after leaving the EU.
Many voiced concern about the environmental cost of physical trade with countries such as Australia.
Ann Cairns, executive vice chair of Mastercard, said it could not be greener to fly beef from Australia than source from local farmers. “Perhaps there is another way to ensure that we buy good local products and reflect true cost and value by factoring in the environmental impact into the supply chain costs.”
Amanda Blanc, group chief executive at Aviva, agreed that the “real costs — including to the environment — should be properly factored in when considering trade”.
Daniel Godfrey, senior adviser to Federated Hermes, said the UK needed to price in the true cost of “externalities inherent in transport and agriculture . . . whether that is done through proper carbon and nature taxes or subsidies”.
Andreas Utermann, former chief at Allianz Global Investors, also raised “externalities” such as the carbon cost of transporting food over vast distances that were “certainly not priced in appropriately”.
He added: “So called ‘tariff-free’ trade deals will need to be scrutinised carefully, in particular when struck by smaller economic entities such as the UK with larger entities . . . also for the often hidden cost, may they be political or economic/financial.”
Paul Drechsler, chair of London First, stressed the political costs of being seen to strive too hard for a deal, saying that the language risked looking desperate and “not the best signal if we are seeking a great deal from the other party”.
He added that in pushing for agriculture “the Australians know they are going for the jugular”, whereas the compelling political argument “must be responsible and sustainable, and support British farmers”.
Shobi Khan, chief executive of Canary Wharf Group, said that the consumer must ultimately decide, however, be it sheep and lamb from Australia or Ireland, and based on metrics such as price, organic status or sustainability.
There was widespread support for another key government objective in bringing in overseas investment from sovereign wealth funds. Gerry Grimstone, the minister for investment, told the FT last month that the UK was in talks with sovereign wealth and pension funds about investing in British green energy projects, including gigafactories and offshore wind farms.
Khan said that SWFs could not only help improve the environment but also the country’s infrastructure.
Cairns said the UK should welcome inward investment provided it is not a “fire sale” of UK assets.
“Sovereign wealth funds are a useful source of capital and it makes sense to look for a wide portfolio of investors,” she said.
But City executives also said the government should not forget domestic sources of finance. Blanc said that overseas investment should be welcomed but added that the UK was not short of capital, with £6tn total pension wealth.
“So this shouldn’t be a question of either/or. I wouldn’t want easy access to SWFs to be a reason to take our foot off the pedal on reforms to get more pension assets invested in long-term, sustainable investment in our communities.”
Anne Richards, chief executive of Fidelity International, agreed that the government should balance overseas capital with resources closer to home, “so that UK pension funds and individuals can benefit from domestic investment opportunities”.
Utermann also warned that it would be naive to turn a blind eye to the “provenance of the SWF . . . sure, let’s be open to capital inflows but let’s be very open and transparent also about the costs”.
Source: Economy - ft.com
