Lord Mayor of London: Trade can help reduce geopolitical tensions

In a wide-ranging interview with Al Majalla, Michael Mainelli discusses Saudi-UK ties, investments in AI and renewable energy and describes Saudi Vision 2030 as 'amazing and ambitious'

Michael Mainelli, Lord Mayor of London
Michael Mainelli, Lord Mayor of London

Lord Mayor of London: Trade can help reduce geopolitical tensions

The United Kingdom is an international financial hub and one of the world’s largest sources of funding. It’s a global gateway for financial and professional services firms, offering an open financial centre with unparalleled international networks, ample liquid capital, and a constant presence of international investors.

The United Kingdom ranks first in innovation in financial and professional services. Its broad knowledge ecosystem includes more than 40 scientific societies, 70 institutions of higher education, and 130 research institutes.

Companies have access to this unique ecosystem of innovation, which combines strong policy support, sustainable financing, access to global markets, and technological efficiencies.

The financial and professional services sectors, gathered in the City of London—often referred to just as 'the City'—employ around 2.3 million people across the country, with two-thirds of these jobs outside London.

Today, the City alone employs 615,000 people, and residents make up around 2% of the UK population and contribute 10% of the GDP.

In the beautiful historic mansion in London’s financial district, opposite the Bank of England, the new mayor of the City, Alderman Michael Mainelli, the Lord Mayor of the City of London, sat down with Al Majalla.

He acts as an international ambassador of sorts in the financial and professional services sector and heads the City of London Corporation (CLC), the governing body of the famous financial district in the UK capital. The mayor and other key members of the CLC ensure that the City’s interests are reflected in local and national policies.

No one takes precedence over the monarch within City limits, and during his tenure, the lord mayor hosts heads of state and governments and other high-level foreign visitors on behalf of King Charles III and His Majesty’s Government.

British Prime Minister Rishi Sunak with the Mayor of London, Michael Mainelli, while attending the traditional banquet usually held in honor of his outgoing predecessor on November 13, 2023.

Mainelli looks forward to strengthening the world’s economic ties with the United Kingdom, creating new business opportunities, and promoting the country as a leading global destination for foreign investment.

Believing in the importance of building partnerships for success, he will promote his Connect to Prosper initiative, which will bring together thought leaders in science, academia, and business to help the City find solutions to global challenges.

Ahead of his trip to Riyadh, Mainelli applauded Saudi Arabia’s Vision 2030, calling it “amazing and ambitious.” The Lord Mayor, who will participate in the World Economic Forum and meet with ministers, officials, dignitaries, and businesspeople, highlighted some key sectors in which the United Kingdom can invest.

The Gulf is very vital for the United Kingdom and is the country’s fourth-largest trading partner after the United States, China, and Switzerland, with a total trade volume of £65bn, of which £17.4bn is with Saudi Arabia, which has investments in the United Kingdom amounting to £65bn.

The Gulf provides an important gateway to the Indo-Pacific, a region that accounts for more than 40% of the global GDP and contains some of the world’s fastest-growing economies. The digital transformation in Gulf countries represents a fantastic opportunity for the United Kingdom’s leading digital sector.

Emphasising the importance of cross-learning, Mainelli says that not only can Saudi Arabia learn a lot from British expertise, but the UK can also learn a lot from Saudi expertise in various industries. He also talks about the importance of AI and how companies are increasingly turning to technology as central to their business model.

Below are key excerpts from the interview.

What new developments in London's Financial District should investors be aware of in 2024? What is the current investment climate like, especially after Brexit?

London has always excelled in science, technology and new markets. Investors may be concerned about Brexit, but although we lost some jobs after Brexit in 2016, we’ve actually grown.

Where we used to have 525,000 people working in London in 2016, we now have 615,000. Although this constitutes about 2% of the UK’s population, our contribution is 10% of the GDP.

In 2016, we managed just over 12% of global assets; eight years later, we managed just under 15%. This means that although the UK comprises just 1% of the world's population, it manages 15% of the world’s assets.

If you want to break down the areas of expertise, I would say that London’s workforce is pretty much split evenly into thirds—one-third work in finance, another third in science, engineering, and technology, and the last third in arts, media, culture, and, oddly enough, shipping.

Our multidisciplinary expertise puts us at the front edge of most areas people are interested in investing in.

People pass the bank of England in the financial district of the City of London, Britain, 21 June 2023. Bank of England Monetary Policy Committee will review interest rates on 22 June amid expectations of another inflation spike.

When it comes to investing in the city, it's not that we need the money; it’s that we're really a big switching house globally.

Large-scale investors seeking a good international perspective will bring their money here. We will then distribute it to Europe, Africa, the Middle East, South America, the US, China, and Australia/Asia.

Of course, UK projects and infrastructure projects are also of interest. But our role is very much a neutral, global role, trying to get the best results for our clients who come here to invest.

What is your stance on the turmoil in the Middle East right now? Particularly the attacks on global shipping in the Red Sea?

We fully support peace and whatever mechanisms will lead to that. Clearly, the Red Sea situation is bad for trade, but more importantly, we want to see the situation in Palestine, Israel, and the Middle East calm down.

Can trade play a role in managing conflict?

Undoubtedly. The more you trade with people, the more you co-invest with people, and the greater your web of connections, the less likely conflicts will arise.

While people are always looking for the next new thing to invest in—such as AI, for example—the more important thing is that we invest somewhere together.

For example, if we partner up to invest in Zambia. You know Zambia really well, and I know wind farming really well; I learn from you, and you learn from me. The project then has a greater chance of success.

Although the UK comprises just 1% of the world's population, it manages 15% of the world's assets.

Michael Mainelli, Lord Mayor of London

As you are heading to the Middle East, specifically Riyadh, which is moving forward with implementing its Vision 2030, what message do you carry to businessmen there, Arab investors, in the GCC countries in particular? What sectors do you think the UK can get involved in?

Vision 2030 is amazing and ambitious. It's great that Saudi Arabia is looking really deep into its future, and I applaud that. One of the best things about Vision 2030 is the creation of good, intellectual jobs for the Saudi people. It is an uplifting vision of what a nation of 40 million can achieve.

What can we help with? One area could be infrastructure, where we have extensive expertise. Another area of cooperation could be science and technology.

We should be more involved in Saudi projects. For example, going back to the importance of cross-learning, we can learn a lot from the Saudis in areas like desalination.

I think where Saudi Arabia is headed in hydrogen technology has great potential, as well as in the fields of biology and healthcare.

We have a day at the World Economic Forum, where we will participate in a panel discussion about what it's like to manage a 2,000-year-old green city like London and some of the things we've learned. I also hope to learn new ideas from people building brand-new cities.

I will also meet with the AI authorities. We have an approach to regulating artificial intelligence using the ISO standards, and 25 countries are already involved in this.

Saudi women stand next to the Saudi pavilion (vision 2030) at the Gitex 2018 exhibition at the Dubai World Trade Center in Dubai on October 16, 2018

Regarding AI, many firms are already based in the UK, Europe, the US, and China. Saudi Arabia is also working to launch its own, and it already hosts many tech giants that are investing heavily in the region. What's your take on this?

Regarding your question about AI, I believe we are in the age of deployment, but it's not new. That's why these ISO standards have existed for decades; we knew that there were ethical issues with AI.

We've been using AI in the City of London for decades. Support Vector Machines are very big here in the late 80s. You're talking about nearly 40 years, and published papers about AI are not new.

AI has become so integrated into companies that, five years from now, we aren't really going to be talking about AI companies—but companies that use AI, for example, to solve a healthcare problem, or to give better financial advice.

So, I think we'll see the diffusion of AI. But as a technology, it definitely needs regulation, and regulation will come in one form or another. I will be talking about how to do this without impeding trade.  

Microchips have become a big industry. Can you speak to their importance? What about cooperation frameworks?

I will be talking about microchip investment while I'm here. As you mentioned, it is a big industry. When we talk about AI, I think the more serious business investments will be in manufacturing.  But these aren't just big bets, they are enormous bets.

And, of course, software is important too. Everyone's working on the software side to reduce chip dependency. Then there's also power consumption etc, so it's a very rich and competitive area, for sure.

Vision 2030 is amazing and ambitious. It's great that Saudi Arabia is looking really deep into its future, and I applaud that.

Michael Mainelli, Lord Mayor of London

As we spoke about GCC in general, where does the GCC-FTA (Free Trade Agreement) stand?

We, the city, weren't involved in negotiating the FTA, that was the central government. However, to me, the importance of an FTA isn't the FTA itself but the process that has been set up.

It is the process that allows you to discuss trade frictions or scratches. I've always been an advocate of the very first FTA being very quick, so it doesn't interfere with trade.

Let's say I was a businessman trading with Saudi Arabia before, and now the government says it wants an FTA. This makes things better because now we've got a mechanism to talk.

So when I have a problem, let's say I'm in cosmetics and I'm trying to export, but I don't do animal testing, but you require animal testing, or vice versa.

Then, we can discuss it and say, well, actually, maybe in this case, the animal testing requirements don't need to happen because you've already done sufficient testing. This helps to smooth the process.

But if you put everything on the table and try to negotiate it upfront, you wind up with a very big process. So, I would support an FTA because it will allow us to keep talking in a structured fashion.

I think the wider GCC one is good, or maybe they will reach an FTA with each country individually. From a city perspective, we support it, but we don't think it's essential and are not personally involved in it.

Can you provide any numbers or statistics that speak to the future of your relationship with Saudi Arabia?

Saudi investment in the UK stands at around £65bn, so it's definitely a good and healthy relationship. Investment spans several areas: hotels and tourism make up 20%, transportation and warehousing 15%, and Financial Services about 13%. The UK is Saudi Arabia's largest trading partner in Europe, with trade worth £17.4bn.

Saudi investment in the UK stands at around £65bn and the UK is Saudi Arabia's largest trading partner in Europe, with trade worth £17.4bn.

Michael Mainelli, Lord Mayor of London

I'm trying to bring a UK firm with me on this trip. They want to set up a major logistics processing centre, which would create a few thousand jobs. We see this as a really good way for us to connect outward, through the Middle East and to India, which is equally booming.

Some voices in the UK are against Gulf investment in the country. They don't like the fact that Qatar or Saudi Arabia are acquiring football clubs or hotel resorts. What is your take on that?

I've heard people object to foreign investment in general. This is normal in any country. But I haven't actually heard anybody say, "We don't like Saudi investment."

However, foreign investment is very important, especially if you care about pensions and the future. You need to diversify. The smaller the country, the more you should invest outside for your long-term interest. Canada, for example, invests 80% of its money abroad.

The world needs to understand that this type of cross-investment is how to minimise risk.

People have been coming to London over the years because of our commitment to treating all visitors fairly. Our legal system and rule of law guarantee the protection of property rights. We have to treat everybody fairly.

London has extensive experience in the financial industry, including the FinTech industry. What advice can you give regarding shifting from the traditional banking sector to the FinTech sector?

FinTech predates the coining of the term. I came to the city in 1984 to put computers into banks and other financial institutions. So that's fintech.

It's been this constant process of digitalisation, as they call it. That's been going on for decades, and it'll keep going. Now, we've seen basically wholly digital banks. And I think when it comes to the retail sector, that's really quite advanced.

I believe the future of FinTech is very much in the SME sector. SME banking could unleash a welter of entrepreneurs, which I think is going to be really crucial for Saudis who are typically employed by the government in a few very large companies. The SME sector will help in the intellectual development of workers, so I applaud that.

Despite large investments in green energy, experts agree that there is still a long way to go before countries can fully count on renewable energy. Experts are talking about at least 50 years.

Nicola Ferrarese

Read more: How Saudi Arabia is building a realistic roadmap for a circular carbon economy

In light of the UK's experience in the green economy, green investment, sustainability and finance in particular, how can a balance be struck between the shift to renewable energy and worldwide economies' need for fossil fuels?

Well, when it comes to greenhouse gas emissions, I divide them into five big areas. The first is primary energy production, which is about 20%. It varies a little bit country to country.

Then, you have domestic and commercial buildings, transportation, and agriculture. The problems in the first four are solvable. Agriculture is very messy; I don't have any answers there.

We, the City of London, helped at COP3 in 1997. Kyoto created the idea that we should use carbon markets. Carbon markets now cover 23% of global emissions. I would like to have to go up, certainly to the 80% mark.

We've proved that we can produce primary energy through solar and wind energy. This raises two other problems. One is the unbalancing of the grids, which have been used for a nice big, stable power supply. Now they're having trouble.

The second thing we're having trouble with in renewable energy is storage. We've always had an electricity storage issue. The difference between renewable and fossil fuel energy is that the latter comes with embedded storage. Whereas the renewable is like now or never.

So, as we look at this going forward, I think hydrogen and the variants methane and ammonia will be very important.

And I think Saudi, and the whole Gulf region is leading on this thinking, I think the second thing is we've proved we can do it in Europe, we're getting close.

We've got Saudi commitment to 2060 in terms of Net Zero and Chinese commitment to 2060. So, we've got to work it out, and we have a maximum of 34 years.

Here in the city, I brought out something called the city carbon translation credit service, which allows people to buy real credits on our Emissions Trading System (ETS) markets. Remember, ETS markets globally are $950bn. You can bet on the 23% of voluntary carbon market players I discussed earlier.

Another exciting development in the voluntary carbon markets has occurred recently, in the last few months. People in the London insurance markets have begun insuring the credits to say that they will get paid if carbon targets are not met. We're starting to see that market maturing and some development in the Gulf.

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