What have capital markets done for us?

A new Barclays report highlights how capital markets are a strategic asset for the UK, investing more than £4 trillion in assets and providing four times the level of funding as bank lending to companies. Jes Staley, Group CEO explains the importance of conducting this research.

“Since the 1930s, there has been a social contract between banks and the communities we represent, designed to facilitate credit and economic growth.

“It was a simple, easy to understand contract.

“Banks take in deposits over the short term, yet lend over the long. This is an inherently risky business. But it’s also crucial to growing the economy. So, for a long time, governments around the world have provided implicit backing for its continued activity, agreeing to supply liquidity to banks with public money, when needed, to keep the system flowing. The financial crisis, and in some instances the behaviour of individual bankers in the years leading up to it, demonstrated that the financial system abused the trust implicit in that social contract. Now, as a result, taxpayers are rightly unwilling to provide this kind of blanket guarantee any longer and it is something we all need to recognise.

“It is for this reason, among others, that we must shift away from relying on traditional bank lending and instead broaden the means through which businesses and entrepreneurs access capital and financing. The answer lies in healthy, diverse capital markets, a centuries old innovation, born in Europe, flourishing in America, but which remains underdeveloped and misunderstood here. I believe that needs to change.

“That is one of the reasons why I asked William Wright to take on this important piece of research. His findings are both fascinating and startling. He outlines the extent to which capital markets are an asset for the UK economy – the oxygen of commerce from which we all benefit. He explores the enduring lack of understanding and pervasion of half-truths that limit their proper use, and he offers up some interesting challenges facing the banking industry, the facilitators of capital markets around the world.

“Since the financial crisis, Barclays has been on a long journey to address some of these issues. This report is another step forward in that process and, I hope, will stimulate yet further debate about how UK businesses can harness the global capital markets better than they have done to date.”

What have the capital markets ever done for us?

1. Capital markets play a vital role in connecting the providers of capital with users of capital

2. Capital markets are a strategic asset for the UK economy

3. UK capital markets play a significant role in the European economy

4. Effective capital markets start with deep pools of long-term capital

5. We are all the end users of capital markets as individuals provide the vast majority of capital through contributions to their pension funds, insurance policies and direct investments

6. Investment banks play a central role in capital markets

7. Asset managers play an important role in managing money on behalf of clients, allocating capital, making investment decisions

8. Since the financial crisis, the capital markets industry has faced significant challenges in rebuilding trust

9. The capital markets industry has also faced significant structural challenges such as regulatory reform, Brexit and the rise of fintech

10. Different sectors of the capital markets industry should work together to rethink how to articulate and communicate a more constructive case for the value of what they do that focuses on the benefits for customers and society

Download What have the capital markets ever done for us? And how could they do it better? (PDF 2MB)