Reform is needed to restore confidence

There is no place quite like our capital. Growing up in London as a mixed-race child of English, Irish and Nigerian extraction did not seem unusual to me; anywhere else and it would have. From the opera at Covent Garden to electro-funk at the Electric Brixton in my constituency, every music genre is catered for and new ones constantly created. From Manet at the Royal Academy to the street art that populates my area, we are spoiled for choice culturally. Little wonder, then, that London is a place those with talent flock to and choose to live in.

This talent, of course, helps power our economy. The latest Office for National Statistics figures show London is by far the largest contributor to the national economy among the English regions and countries of the UK. Yet we cannot rest on our laurels.

We house one of the world’s leading financial centres and financial services contribute 22 per cent of our gross value added (GVA). But this sector has been brought low by scandals, including the mis-selling of payment protection insurance and interest rate swap products to consumers and small businesses; and the attempted rigging of the Libor rate. This has done immense damage to the City’s international reputation, with talk of a “London problem” that has the potential to harm our economy.

At the same time, many small firms struggle to access the finance they need to grow and, as the Bank of England reiterated in recent weeks, a lack of trust in banks deters many business owners from approaching them for finance. These firms complain that the City is not providing the patient capital the real economy needs.

We must act now to repair the City’s standing at home and abroad. It is in no one’s interest for it to be held in such low esteem, which is why I have said it was wrong for Vince Cable [the business secretary] to brand bankers as “spivs and gamblers”. We need real change to restore trust and confidence.

That is why Labour strongly supported the recommendations of the Independent Commission on Banking headed by Sir John Vickers, while the government has decided to water down some of its key recommendations. We would promote greater competition in the banking sector through new challenger banks, introduce a code of conduct for bankers and launch a financial crime unit within the Serious Fraud Office.

Some say we need less financial engineering and more real engineering. It is true that we need to expand other productive sectors of the economy – professional, scientific and technical activities contributed just 12 per cent to London’s GVA – but we cannot grow these other sectors if our financial services sector will not fund them. That is why we need a British Investment Bank to help get finance to those – including small manufacturers, innovators and designers – who will drive growth and job creation as part of a proper industrial strategy. Britain is the only G8 country without a government-backed investment institution and there is growing support for one. Last month, shadow chancellor Ed Balls and I launched a consultation with the British Chambers of Commerce and others to help design a British Investment Bank to address our historic lack of long-term capital and the dearth of ready finance for smaller enterprises.

Another priority is the need to develop the skills of London’s workforce in an increasingly competitive world. Too many young people are out of work and not enough of them have the technical and engineering skills that many of London’s firms need. Key sectors have persistent and costly skills gaps that we need to work with industry to solve and, in contrast with other countries, there is not enough support to help with the transition from school to work.

Skills shortages hold back both individuals and our economic potential. In my conversations with businesses of all sizes, addressing this challenge always tops their lists. That is why we have called for a new technical baccalaureate, giving employers more control over training so that young people have the opportunity to develop the practical and technical skills they need for the future, and for action to make it easier for small firms to take on their first apprentice.

Finally, our small businesses are the lifeblood of our economy, employing more than 1.7m people across London. Setting up a business here is not for the faint-hearted – our numbers of business births and deaths are the highest in the country. We want more people starting up, leading and growing businesses. If we are to unlock the entrepreneurial potential of London we need a much more supportive environment for business, particularly those starting out.

Despite being out of office nationally, Labour-controlled councils across Britain are developing innovative policies to support wealth creators and risk takers. In Wales, for example, Labour councils have developed a smartphone app to help small firms bid for procurement contracts, while Reading council has designed social media tools to match young people looking for work with local firms looking for employees. There is no reason we cannot do the same in London.

Last year, the Olympic and Paralympic Games offered a compelling vision of our city at its best, but also pointed to how we can be even better – a modern world city at the heart of the UK, at ease with itself and its history, outward-looking and confident. Let’s keep this positive vision in mind as we look to London fully reaching its potential, helping Britain punch above its weight in an increasingly competitive, globalised world.

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Chuka Umunna is shadow secretary of state for business, innovation and skills and Labour MP for the south London district of Streatham.