A regional perspective on financial services trade in the Covid-19 era

New historical data allows us to see the contribution of each region to the UK’s financial services trade surplus

 I was pleased to be part of TheCityUK’s first-ever webinar last week. Along with Paul Swinney, Director of Policy and Research at Centre for Cities, I explored the potential impact of Covid-19 on the UK’s regions and nations, elaborated on some of the themes from my previous blog post, and also presented some new analysis. My actual presentation is available here, but there is so much more to say about regional issues that I thought a follow-up post was in order.

One question that’s coming up with increasing frequency is how the pandemic will affect UK trade. Even more so than with domestic-economy indicators, it is too soon to develop an accurate picture—trade data are generally published with an even longer lag than other macroeconomic indicators. Moreover, most of the trade analysis in recent weeks has focused on merchandise trade—often related to the discussion of global supply chains, disruption to those supply chains, and the possibility of crisis-inspired shortening of those chains in future. As I’ve written previously, it is much more difficult to measure services trade than goods trade, but services trade is crucial for the UK’s overall external position, accounting for around 40% of total trade.

Although the most direct and dramatic effects of the current pandemic have been on services sectors, we should remember that some of these are generally non-tradeable (for example, health and beauty services) while others are key components of services trade (for example, travel and tourism). So the impact on services trade will vary enormously by sector. Looking specifically at financial services, if we assume that industry output in the UK will decline only modestly (as both the Bank of England and the Office for Budget Responsibility, as well as a number of private-sector analysts, have estimated), it is reasonable to assume that financial services trade will decline only modestly. Moreover, the type of severe disruption to both demand and logistics that is affecting trade in goods and some services like travel does not, in the main, affect financial services. 

Our previous research has shown that around half of the UK’s financial and related professional services exports come from regions other than London. Since our report was published, the Office for National Statistics has published new data covering services imports as well as exports. Using these updated figures, we have analysed trends in regional financial services trade. Overall, in 2017 London accounted for 52% of the UKs £76bn in industry exports, and 47% of the UK’s £32.1bn in industry imports.

That large gap between industry exports and imports is mirrored in every region of the UK, and in the aggregate this dynamic accounts for the UK’s overall financial services trade surplus of £43.8bn.[1]

Financial services imports and exports by region, 2017


FS exports, £m

FS imports, £m

North East



North West



Yorkshire and The Humber



East Midlands



West Midlands



East of England






South East



South West









Northern Ireland






Note: .. denotes values that have been suppressed for reasons of confidentiality or reliability.

Source: Office for National Statistics

Based on this, we can see the contribution of the different regions to the UK’s financial services trade surplus. Scotland, the South East and the North West make particularly large contributions (in addition to London of course).

Regional financial services trade surplus

Note: disaggregated data for Wales and Northern Ireland are not available.

Source: TheCityUK calculations based on Office for National Statistics data

As I noted in my earlier analysis, the impact of Covid-19 will vary from region to region and sector to sector. Although there is still too much uncertainty about the future to confidently assess the regional impacts, some broad assertions are possible even at this early stage. One such generalisation is that financial services activity overall, and financial services trade in particular, are unlikely to be prime transmission channels for the pandemic’s economic impact on the regions. For one thing, overall UK trade in financial services is likely to be relatively little-affected, as noted above, despite the massive overall disruption to global trade (the World Trade Organisation estimates that world trade will plunge by 13-32% in 2020 because of the disruption caused by the pandemic).[2] For another, in most regions financial services net exports (a component of overall economic output) accounts for a relatively small share of GVA (around 2% on average).

A number of other angles also need to be explored to consider the impact of Covid-19 on the regions; some of these, such as household income and expenditure, are likely to have a bigger near-term impact on regions’ economic fortunes that trends in services trade. For this reason, I plan to explore these issues in more detail in a future blog post.

[1] World Trade Organization, ‘Trade set to plunge as COVID-19 pandemic upends global economy’, (8 April 2020), available at: https://www.wto.org/english/news_e/pres20_e/pr855_e.htm

[2] This total UK figure differs from the total UK financial services net exports figure in the Pink Book, the ONS’s annual publication on the UK’s external position. The Pink Book reports a figure of £61.1bn for 2017, which we have used in other analysis. The difference arises from different methodologies used to compiles the UK-wide and regionalised trade statistics.