UK financial services 'still in fine fettle'

The UK's financial services industry has shown remarkable resilience growth over the past two years, despite what a new report describes as a "challenging" global environment.

UK Financial services in fine fettle
This year's ‘Key Facts: UK-based Financial and Related Professional Services’ report - published by the industry body TheCityUK' - shows the sector has seen significant employment growth and continued inward investment flows over 2021 and 2022.Employment in the sector increased in 2021 to almost 2.5 million, up 9.2 per cent year-on-year, meaning roughly that one in every 13 people was employed in the industry, two-thirds of them based outside London.

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The report also found that the industry’s economic output rose by £14 billion in 2022, to £275 billion, representing 12 per cent of the UK's gross added value (GVA).Productivity in financial services sector increased by 14 per cent over the year and is now almost 2.5 times higher that the whole-economy productivity rate in terms of output per hour: £96.3 for financial services compared to £40 for the economy as a whole.Anjalika Bardalai, chief economist and head of research at TheCityUK, said: “The financial and related professional services industry is an enabler of growth in the wider economy, making significant contributions to UK employment, tax receipts, and the balance-of-payments position."It is a crucial economic asset but also has a tangible impact on people's daily lives, supporting their ability to save for the future, invest in businesses, and manage financial risks."This year’s report underlines how – just as it did during the pandemic-induced economic shock of 2020 – the industry continues to evolve to support people, businesses and the wider economy against a challenging and fast-changing macro-economic backdrop.”The report said that while overall direct investment flows into the UK were negative in 2021, the financial services sector was among the few sectors to register positive FDI inflows, attracting £4.5 billion.Other points in the report included:
  • the financial services sector contributed £75.6 billion in tax revenue in 2019/20, accounting for 10.1 per cent of total UK tax receipts, equivalent to 3.4 per cent of GDP.
  • outstanding amount of loans made available by major banks to UK businesses totalled £538.7 billion as of last November, with 37 per cent being lent to SMEs.
  • in 2021, private equity funds invested £34.8 billion in more than 1,800 UK companies. Regionally, London accounted for 35.5 per cent of the total, followed by Yorkshire and the Humber (16.6 per cent), the North West (11.8 per cent), and the South East (11.3 per cent).
  • the UK has the largest and most developed market in Europe for related professional services (accounting, management consulting and legal services). These three sectors contributed £33.5 billion, £14.5 billion and £34 billion respectively to UK output in 2022.
  • UK fund managers helped to protect and grow around £11.6 trillion in financial assets in 2021, up five per cent from 2020.
TheCityUK added in a statement: "The financial and related professional services industry is also involved in financial education programmes, social initiatives and alternative finance solutions for businesses and clients. Several companies have implemented programmes to support consumers and employees with the current high cost of living."

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