The UK is the leading centre for financial and related professional services (FRPS), exporting more financial services than any other country and hosting the highest number of FRPS headquarters. The country leads across a diverse range of businesses, from international arbitration to fixed income trading and specialty commercial insurance.
London is also a leading global FRPS cluster due to its network of interconnected businesses, suppliers, and associates. This “cluster effect” – which encompasses the full range of FRPS – provides the UK’s FRPS businesses with better efficiencies, productivity, access to talent, and more rapid innovation than other international locations.
Consequently, the UK FRPS industry is a core driver of the economy, responsible for 12 percent of economic output and employing nearly 2.2 million people. Our reach extends far beyond the City of London, with two-thirds of employment outside the capital. Professional services employment outstrips financial services employment. The industry is also an enabler for the rest of the economy, providing financing for businesses and a wide range of products and services to individuals.
Sustaining and growing the FRPS industry is critical for the future of the UK economy.
However, growth is not guaranteed and action is required to secure new opportunities. Jobs (particularly outside London) are under threat from automation and off-shoring. Profitability is down, with many businesses seeing large declines in return on equity since the 2008 financial crisis. At the same time, the competitive environment is hardening. Some Asian regional centres are benefiting from rapid local GDP growth, and the US is capitalising on a leading position in fast-growing sectors such as investment management and cyber insurance. The capabilities required to power tomorrow’s success in a more global, competitive and technology-fuelled FRPS industry are changing.
The vote to leave the EU in the recent referendum amplifies the challenges we face and creates additional ones, including the potential loss of the current level of access to the EU single market. It also creates opportunities that must be made a reality.
Securing the industry’s pre-eminent position is not only important for FRPS. It is because of UK leadership in FRPS that global companies invest in our country. The depth of talent in banking, insurance, asset management, law, consulting and accounting creates jobs through the value chain.
To overcome the outlined challenges, sustain our competitive advantage as the leading global FRPS cluster and continue to lead in global FRPS expertise and innovation, we should focus on five priorities: