Against a challenging backdrop, the UK-based financial and related professional services industry has demonstrated its resilience, seen significant employment growth, and continued to attract positive inward investment flows, according to the latest available data set out in TheCityUK’s ‘Key facts about UK-based financial and related professional services 2023’ report.
The data in the report refer to 2021 and 2022, the latest periods for which annual data are available.
Employment in financial and related professional services increased substantially in 2021 to almost 2.5 million, up 9.2% year on year from 2.2 million. Around one in every 13 people is employed in the industry in high-skill, high-value jobs, with two thirds of those based outside London in towns and cities across the UK.
The industry’s economic output (gross value added (GVA)) also grew in 2022, rising 6.8% to £275bn, up £14bn year on year and accounting for 12% of the UK’s total GVA. In 2021, productivity in the financial services sector increased, up 14% year on year. The sector’s productivity is almost 2.5 times as high as whole-economy productivity in terms of output per hour: £96.3 for financial services compared with £40 for the whole economy.
While overall direct investment flows into the UK were negative £52bn in 2021, the financial services sector was among the few sectors to register positive FDI inflows, attracting £4.5bn. Over the past five years (2017-2021), cumulative inflows of financial services FDI totalled £60.8bn, equivalent to 36.6% of overall FDI – more than any other sector.
Anjalika Bardalai, Chief Economist and Head of Research, 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 macroeconomic backdrop.”
Other highlights from the report include:
- UK financial services contributed £75.6bn in tax revenue in 2019/20, accounting for 10.1% of total UK tax receipts, equivalent to 3.4% of GDP.
- The outstanding amount of loans made available by major banks to UK businesses totalled £538.7bn as of November 2022. Of this total, 37% was lent to SMEs.
- In 2021, UK private equity funds invested £34.8bn in more than 1,800 UK companies. Regionally, London accounted for 35.5% of total amount of capital invested, followed by Yorkshire and the Humber (16.6%), the North West (11.8%), and the South East (11.3%).
- Small caps from across the UK enjoy access to one of the largest share markets for small companies in Europe, with 816 companies quoted on the AIM by the end of 2022. AIM companies raised £2.4bn through new and further issues of shares.
- The UK has high quality professional and support services; it has the largest and most developed market in Europe for related professional services (accounting, management consulting and legal services). These three sectors contributed £33.5bn, £14.5bn and £34.0bn respectively to UK output in 2022.
- UK fund managers helped to protect and grow around £11.6trn in financial assets in 2021, up 5% from 2020, representing savings through pensions, life assurance policies and other investments.
- Pension participation has been increased, partly because of automatic enrolment that was introduced in 2012. In November 2022, contributions to personal pension pots totalled £13.7bn in 2020/21, up 11% from 2019/20. Over the same period there was an increase in the annual average contributions per member from £1,100 to £1,700.
- LawTech businesses in the UK had received around £674m in investment as of December 2020. The average annual growth rate of investment in LawTech from 2017 to 2020 was 101%, greater than the growth showed in other similar sectors, such as FinTech (20%), ClimaTech (5%) and HealthTech (47%).
- 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.