LONDON: NRI industrialist Lord Swraj Paul has demanded an intensive probe into the raging banking crisis in Britain, saying the Libor fixing has hurt the reputation not only of the financial services but the country as a whole.
Participating in a debate on the “international competitiveness of UK industry” in the House of Lords last evening, Lord Paul said: “The biggest issue at the moment for industry is the banking crisis. This is so fundamental to our national economy that it must be investigated intensively, and resolved.
“And resolution must avoid any political point scoring, as the whole country needs to have its faith restored in the financial sector. The Libor fixing has really adversely affected everyone. It has also hurt the reputation not only of the UK financial services, but the country as a whole. We cannot afford that.”
The debate comes in the wake of Barclays chief executive Bob Diamond’s resignation after the bank was fined 290 million pounds last week after some of its derivatives traders were found to have attempted to rig Libor – the London inter-bank lending rate.
Libor is considered to be one of the most crucial interest rates in finance and it underpins trillions of pounds worth of loans and financial contracts.
So when Barclays was fined, public confidence in banks was shattered. The scandal forced Diamond to resign.
At the outset, Lord Paul, Chairman of the Caparo Group – an industrial manufacturing company, noted “the issue of competitiveness is vital for the future of our country’s economy. And nowhere is this more significant than in manufacturing. Having been intimately engaged in this activity all my life, your Lordships will appreciate why I will focus largely on this sector.” Lord Paul said: “after a long while, the manufacturing segment of our GDP has shown an appreciable increase in the past three years. This is intrinsically commendable but it is not enough.”
He said: “Britain is now the ninth largest manufacturer in the world – though a far cry from our ranking in the past.
My own experience and evaluation tells me that, given appropriate encouragement, we can substantially enhance that position.”
He said: “our manufacturers are doing almost everything they can. And they are keen to do more. But for Britain to get the fullest benefit of their endeavors there must be a much more supportive environment. Today, many manufacturers feel that a more positive and creative approach by government will help to engender those conditions that enable them to maximize their potential.”
Lord Paul said he believed that there is considerably more that the government could do to structure the context in which manufacturers could achieve a higher level of competitiveness – a condition that would be of great benefit to the country as a whole.
“We live in a world of globalize interaction – a world in which many governments encourage and support their manufacturing industries. We need to do this – and do it fast.
Otherwise, others will gobble up the gains we have so resolutely made,” he cautioned.
Suggesting remedial measures, Lord Paul, who is also Chancellor of two British Universities – Wolverhampton and Westminster – said: “There is, above all, the question of inadequate access to finance.”
“It is now almost four years since the on-set of the banking crisis with its crippling impact on credit availability – particularly to small and medium-sized manufacturing enterprises. Despite Government initiatives, such as the Project Merlin, the money is just not flowing – even from institutions within its control such as Lloyds and RBS (Royal Bank of Scotland).
“In view of this, it is now imperative to create a new corporate institution dedicated to industrial finance – a high-powered, well-endowed industrial bank of a kind that I have been advocating in this House and elsewhere since this financial crisis began in 2008,” he said.
He also wanted the government to look into the costs and time-consuming effect of “red tape”.
Despite occasional reassurances, “the bureaucratic tangles of regulatory consent and like procedures continue to escalate. Of course, we must have protection. But our excessive foot-binding is making it easier, cheaper and less risky to establish projects in countries where these burdens are less onerous.” -PTI