TheCityUK finds industry contribution to UK remains robust despite pandemic

TheCityUK’s annual report of key facts about the UK-based financial and related professional services industry demonstrates the vital role it has played in supporting businesses and customers through the pandemic, while continuing to make a considerable contribution to wider UK prosperity.

Lending by the industry has been a key factor in keeping business going despite the challenges posed by the measures taken to protect public health. Outstanding loans by major banks to UK businesses totalled £529.9bn at the end of 2020, up 8.3% from 2019. Of this total, 40.1% was lent to SMEs.

UK and international companies raised £43.2bn in issues of shares on the London Stock Exchange in 2020: £32.3bn in issuance of shares on UK markets; and £10.9bn in international main markets.

Although the full impact of the pandemic and Brexit will not be known for some time as official economic data is published with a lag, early data show that while the UK GVA shrank by 9.1% in 2020, the contribution to that decline (0.2 percentage points) and the decline in hours worked (6%) has been less in financial services than the average for all UK industries (0.5 percentage points and 20% respectively).

UK professional and legal services firms have also provided essential support throughout the pandemic, helping advise businesses and the government on how to best respond and protect the interests of the public, employees, customers and clients.

Anjalika Bardalai, Chief Economist and Head of Research, TheCityUK, said,

The early signs are that financial and related professional services have suffered less than many other sectors of the economy — no doubt in part because of the ability of many industry employees to work remotely, but also in part because of continued demand for its products and services. The pandemic has also served to emphasise the essential role the industry plays as a contributor to and facilitator of the wider economy.”

In 2019, the most recent year for which data are available, the UK-based financial and related professional services industry employed over 2.3 million people, up by 25,000 on the year before. The report shows that two thirds of those employed by the industry are based outside London, with 21 towns and cities across the UK having over 10,000 people in employment in the industry.

Other highlights from the report:

  • UK financial services continue to be a vital source of tax receipts, contributing £75.6bn in tax revenue in 2019/20, 10.1% of total UK tax receipts, a figure which equates to almost two thirds (61%) of the total education budget.
  • The industry generates £10 of every £100 of UK economic output, with financial and related professional services contributing £194.2bn to UK economic output in 2020.
  • UK-based financial and related professional services generated a trade surplus of £77.9bn in 2019, with half the exports that contribute to this surplus generated in places outside of London.
  • The UK’s trade surplus in financial services is nearly equivalent to the combined surpluses of the next two leading countries (the US and Switzerland).
  • The industry’s trade surplus is more than the combined surplus of all other industries in the UK that register trade surpluses. This helps to partly offset the UK’s trade-in-goods deficit of £130.9bn.
  • Financial services sector productivity remains almost twice as high as whole-economy productivity in terms of output per hour: £62.9 in 2019, compared with the average for all industries of £36.4.

Read the full report: Key Facts about UK-based financial and related professional services 2020