Regional—and sub-regional—reflections: financial services exports

The importance of services exports from regions and nations outside London is underestimated.

My last blog post was about financial and related professional services exports from the UK. Since then, I’m very pleased to have published the second edition of TheCityUK’s report detailing industry exports from the different British regions and nations.

Our research finds that London accounted for 52% of British financial and related professional services exports in 2017. This high percentage comes as no surprise given that London is the world’s leading international financial and related professional services hub. When thinking of UK trade, popular perception is that regions and nations outside London are associated with merchandise trade, and particularly manufacturing exports—but people often don’t realise how important services trade is throughout Great Britain. For example, in the North West, services exports totalled £18.3bn in 2016—equivalent to two thirds of the £27.8bn in that region’s goods exports. Out of that £18.3bn in services exports, financial and related professional services accounted for a third. Financial services was the biggest exporting service sector in every single region and nation except for the South East.

The latest ‘Exporting from across Britain’ report builds on our 2018 research, which was the first time we had been able to estimate industry exports from the various regions and nations, as I wrote here. This year, thanks to detailed new data from the Office for National Statistics (ONS), we were able for the first time to analyse industry exports at a sub-regional level. Out of the 40 sub-regions in Great Britain (for example, Eastern Scotland or West Yorkshire), 15 have at least £1bn in financial services exports. Although many of these are to be expected—for example, the two Inner London sub-regions, Eastern Scotland, the West Midlands metropolitan county and Greater Manchester all make the list—others may come as more of a surprise. For example, East Wales recorded £1.7bn of financial services exports, and East Anglia recorded £1.2bn.

On closer inspection, the most prominent financial services exporting sub-regions are associated with key cities—an implicit statement about the extent to which financial services, like most services, is fundamentally an urban activity, albeit one geographically dispersed throughout the UK. For the first time, the ONS also analysed services exports from the 15 joint authorities, and found that “Financial services were an important category of service exports for the joint authorities, making up more than 18% of service exports in 12 of the 15 joint authorities analysed”.[1]

Excluding London, the combined authority known as Edinburgh and South East Scotland City Region led in this regard, with £3.2bn in financial and insurance exports—representing 47% of that area’s total services exports. In six other non-London combined authorities, financial services exports were more modest in nominal terms (around £500m-£2bn), but in relative terms, represented fully 40-50% of the relevant area’s services exports. These were: Cardiff Capital Region (financial services exports were 51% of total services exports); West Midlands Combined Authority and Swansea Bay City Region (both 47%); Glasgow City Region (44%); Sheffield City Region (43%); and the West of England Combined Authority (41%).

We have often made the case for improved sub-national data, arguing that a more geographically detailed understanding of economic trends can facilitate more effective regional and local policymaking. The ONS’s new services export data is an important and very welcome example of regional data improvements—and how data can illuminate broader trends and challenge long-held perceptions. The trade surplus is an obvious and oft-cited example of the positive economic contribution made by the UK-based financial and related professional services industry. But our new research takes us beyond that aggregate figure to look at the trade-oriented contribution the industry makes even in smaller UK cities far from the global hub of London

[1] Office for National Statistics, ‘International exports of services from subnational areas of Great Britain: 2016’, available at: https://www.ons.gov.uk/businessindustryandtrade/internationaltrade/articles/estimatingthevalueofserviceexportsabroadfromdifferentpartsoftheuk/2016