The US and UK occupy a unique position among global exporters of financial services.
Following my presentation of oral evidence to the House of Commons International Trade Committee in March, I was pleased to be invited by the House of Lords EU Financial Affairs Sub-Committee to present oral evidence to them. The theme of the session earlier this month was financial services exports, so it covered some ground that would be familiar to readers of our economic research. For example, I spoke about industry exports from the different British regions, and the fact that—contrary to popular perception—it’s not only London that sells financial services overseas. But the session was wide-ranging, touching on issues of trade, investment and regulation, so I was able to explore new areas as well.
I have previously explored the geographical concentration of the UK’s financial services exports (for example, in my last post and this earlier one). But one of the questions put to me this week by the Committee was about the UK’s financial services exports in the context of other notable financial services exporters.
We have often said that London is the world’s leading international financial and related professional services centre, and supported this claim by observing that the only other full-spectrum centre offering the comprehensive range of financial and related professional services on a significant scale is New York. However, given the enormous size of the US market, New York’s industry inevitably has more of a domestic focus than London’s (the UK’s population is about five times smaller than the US’).
But this is a nuance—London and New York operate at roughly the same level in terms of value of financial services exports. And although I spoke to the Committee about other prominent exporters of financial services such as Luxembourg, Germany and Singapore (the world’s third-, fourth- and fifth-ranked financial services exporters respectively), their industry exports range from around $30-$60bn)—a completely different level than the US and UK, regardless of their high positions in this particular league table. The point is apparent in the table below:
Note: values represent the average over 2016-2018.
For anyone wondering how these data align with our oft-quoted statistic that the UK has the world’s largest financial services trade surplus, it stems from the fact that US imports of financial services are larger, relative to its exports, than the UK’s are relative its exports. In technical terms, this makes the US the world’s largest financial services exporter, but the UK the world’s largest financial services net exporter. And, in a future post I will start to examine which financial services sectors are the most export-oriented.