Financial services weather the COVID storm

The resilience of the UK's financial services in times of global uncertainty has been illustrated by a new report indicating year-on-year growth of 8% in 2021.

finanical trade
The report, 'UK Key Facts' produced by the sector's trade body, TheCityUK, shows that, after a 0.6% contraction in 2020 owing to the global pandemic, the UK-based financial and related professional services industry rebounded with a £19 billion rise in output last year.

Such a rise meant the sector's output reached £261 billion - 12% of total UK economic output.

“The UK’s financial and related professional services industry has weathered the challenges of the pandemic period well," said Anjalika Bardalai, chief economist and head of research at TheCityUK.

"Its relative stability reflects the essential enabling role the industry has within the wider economy, and the continuing strong demand for its products and services within the UK and beyond.

"This characteristic means that it is well-placed to withstand the myriad economic and geopolitical challenges the coming year is set to deliver, and — particularly given its high productivity, with output per hour more than twice as high as in the economy as a whole - to continue to support UK customers and businesses to help them maximise their own output and productivity.”

In an industry where 19.5% of workers are international, rising to 42% in fintech, the report said that employment "also remained relatively resilient throughout the pandemic".

Although there was a 0.5% fall in employment in 2020, more than 2.2 million people – or about one in 14 of UK jobs – remain employed in the sector, with two-thirds of them based in towns and cities outside London.

TheCityUK added: "The financial services sector remains one of the most productive in the UK economy, with the productivity of the sector more than twice as high as whole-economy productivity in terms of output per hour. Output per hour for the financial services sector was £83.30 in 2020, compared with whole-economy productivity of £39."

According to the report, the sector continued to be a vital source of UK tax receipts, contributing £75.6 billion in the 2019-20 financial year, representing 10.1%t of total UK tax receipts.

And at the height of the economic strain from the pandemic in 2020, the report found that the industry continued to attract Foreign Direct Investment, with inflows of £19.7 billion, representing more than half of total inward FDI.

Other findings from the report included:
  • The outstanding amount of loans made available by major banks to UK businesses totalled £525.5 billion by the end of 2021, some 40% going to small and medium-sized enterprises.
  • In 2020, private equity funds invested £25.1 billion in more than 1,300 UK companies. Regionally, London accounted for 44.2% of total amount of capital invested, followed by the South East (13.2%), Wales & SW England (12.4%), and NW England (also 12.4%).
  • The UK has the largest and most developed market in Europe for related professional services. In 2021, these sectors contributed significantly to UK economic output:  accounting (£29.5 billion), management consulting (£33.3 billion), and legal services (£24.6 billion)

Read more news and views from David Sapsted, July articles.

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