Financial markets in the UK see gradual recovery over past 18 months

Our May 2011 City Indicators Bulletin found that 10 out of 11 indicators of financial services activity were higher in Q1 2011 compared with the same quarter in 2010. The CBI/PwC survey indicated that the volume of financial services business rose in Q1 for the seventh survey in succession with a further increase expected for Q2. Overall the short term picture was mixed with five indicators rising, five falling in Q1 and one flat compared with the previous quarter. Indicators on the up in Q1 included trading in UK equities and financial derivatives, while City job vacancies were at their highest point for over two years. Bank lending to the non-bank private sector was marginally up, but generally has been relatively flat for the past two years.

Indicators to show a decline included new FSA authorisations of firms and approvals of individuals. IPOs also had a weaker Q1 following the pick-up in the fourth quarter of 2010. The office market in central London was less busy than previous quarters with take-up dropping, the vacancy rate edging up and prime rents stable.

Financial and professional services continue to make a substantial contribution to the UK economy according to the new edition of TheCityUK's semi-annual Trends in UK Financial and Professional services. Key aspects include:

• Over 1 million people working across the UK in financial services, nearly 4% of total UK employment. About one third are employed in London and two thirds in the rest of the UK.

• The UK financial services trade surplus of £36bn in 2010 helping to offset the £98bn deficit in trade in goods.

• The UK's financial services industry contributing £124bn to UK GDP in 2009, accounting for 10% of total economic output.

• UK financial services contributing £53bn in tax revenue in 2009/10, 11% of total UK tax receipts.