Diverging trends between financial services export values and volumes persist across different geographies
Our recent economic research, ‘Exporting from across Britain’, quantified financial and related professional services exports from the various regions and nations of Great Britain. That the UK is one of the world’s leading exporters of such services is well known, and London’s role as a major global financial centre is very familiar. Less well known is the fact that, according to our analysis of experimental ONS data, around half of industry exports originate in areas outside London. In particular, the South East and Scotland make notable contributions, accounting for around 10% and 7% respectively of Britain’s total financial and related professional services exports.
As the global trading system appears to be undergoing a profound shift, it would be helpful to understand industry export destinations in more granular detail. Unfortunately, the available data only give us a very general view of the proportions of financial services exports going from each British region or either to the EU, or to the rest of the world. Overall, in 2022, 29% of British financial services exports went to the EU, and the remaining 71% went to non-EU countries. The regional variation of financial services exports’ destination is moderate: individual regions’ share of financial services exports going to the EU ranged from 21% to 35%, and the regional range of exports going to non-EU countries ranged from 65% to 79%. For the top three exporting regions (London, the South East and Scotland) the EU/rest of world split was extremely similar, at around 30%/70% in each case.
In previous blog posts I’ve examined UK financial services exports to the EU and different metrics (values vs volumes) for financial services exports overall. Below, I bring this analysis together. The data show that financial services exports to the EU demonstrate the same divergence between values and volumes that is evident when considering those exports globally:
Between 2016 and 2024, UK financial services exports to the EU rose by an annual average of 6.8% in value terms but only 1.1% in volume terms. Similarly, UK financial services exports overall rose by an average of 7.3% a year in value terms but only 1.8% in volume terms in the same period.
Also similar to the trend for sector exports overall, insurance made a particularly important contribution to financial services exports to the EU in both in volume and value terms. Whereas the volume of finance activities exports to the EU rose by an annual average of just 0.6% over 2016-24, the volume of insurance exports increased by an annual average of 6.9% over the period, serving as a driver of the overall 1.1% growth rate for total financial services. (Finance exports are around 10 times higher than insurance exports.)
As I noted in the previous post, there isn’t a single definitive answer for the divergence between export values and volumes. It is entirely plausible that barriers to services trade with the EU that arose from Brexit, notably the loss of ‘passporting’ rights, contributed to subdued transaction growth with that region. In contrast to the 1.1% annual average growth rate for financial services exports to the EU, export volumes to the rest of the world rose by an annual average of 2.2% (from a higher base).
But even the 2.2% non-EU volume growth figure is far below the 7.6% annual average growth figure for non-EU export values, suggesting that more universal factors, such as demand shifts, price inflation or currency effects may be playing a part.
