Funding the European growth agenda

 

Article from an occasional series of topical thought pieces sent by Head of Global Corporates Clare Francis to Lloyds Bank Business Leaders community.

About the author

Clare Francis

Managing Director and Head of Global Corporates, Lloyds Bank

To support the real economy and provide funding for growth, Europe’s capital markets need to be vigorous, well-functioning and stable. The EU is home to over 500 million people – many of whom are savers and investors. It has 22 million SME’s, 50,000 large corporates and supports 218 million jobs. All of these are interconnected and it is essential that the financial ecosystem and capital markets continue to develop to support the needs of all stakeholders.

The UK is at the heart of Europe’s capital markets and, as we work, post Referendum, through the structures of the future relationship with the rest of the EU, it is vital that we continue to ensure the system works for all constituents. Connecting the voices of the corporate and financial sectors will be important in ensuring all needs are covered, and within this it is important that the financing needs of the corporate sector are well understood and articulated.

Economic growth in Europe has faced considerable challenges since the 2008 global financial crisis. Having stabilised the banking and financial system, policymakers, including the European Commission, are now addressing growth and jobs. Within that agenda to create sustainable and consistent long term growth and employment, major initiatives including the Capital Markets Union and the Juncker plan have focused on developing capital markets to support the capital and growth needs of the future. Parts of this market are fragmented and there are gaps in funding sources for some segments of the economy.

Two weeks ago I chaired a panel that debated the challenges and changes facing the growth financing agenda. This panel was part of the conference, "The future for Europe’s Capital Markets post Referendum", organised by the Association for Financial Markets in Europe (AFME), the industry association of leading banks active across Europe.

The discussion focused on major areas of the economy including the vital role played by infrastructure in underpinning growth. Energy, water, transport, and digital communications networks are key enablers for growth within the wider economy. They affect the competitiveness and prosperity of every business and community, as well as boosting productivity, international trade and improving quality of life. Financing infrastructure can be complex and as infrastructure investment is long term and capital intensive in nature it can be particularly vulnerable to political and economic uncertainty. We agreed that it is important that business makes its case for what is needed and that we continue to develop infrastructure investment plans and the financing mechanics required to support them.

This panel was part of a broader AFME initiative on supporting growth. As well as representing Lloyds Bank as an AFME Board Director, I have been privileged to chair AFME’s Growth Strategy Group. Formed in 2013 the Group looks at how collectively the financial sector should play its part in stimulating European growth. A core principle has been to work with and articulate the needs of the engines of the real economy – both borrowers and investors. We have worked with market users of all types across Europe, including Lloyds Bank's corporate clients, collecting fact-based evidence to develop a series of practical recommendations to address gaps and remove obstacles to investment and unlock more funding for growth. The Group’s areas of focus have included increasing the range of funding alternatives available to European small and medium-sized enterprises; to increase flexibility in how large and mid-sized companies access finance; and to make infrastructure investment more accessible to non-bank investors. A key part of the work has also involved comparing the capital markets in Europe and the US to establish where there might be opportunities to draw on successful practice in the US capital markets to mobilise investment and growth in Europe, which were summarised in AFME’s "Bridging the Growth Gap" report.

This agenda underpins our belief that banks must be focused on the real economy if we are to serve our clients and the range of communities in which we operate. It is important that we articulate how the financial system needs to develop to continue to serve the real economy both in the UK and the rest of Europe. I mentioned the need to connect the voices of the corporate and financial sectors in this debate, and I look forward to discussing with you further how we might come together on this. We see supporting the growth agenda as a key driver in helping Britain prosper globally.

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