RASHTREEYA SIKSHANA SAMITHI TRUST®

RV INSTITUTE OF MANAGEMENT
BANGALURU-5600041
(Autonomous Institution Affiliated to BCU)

MASTER OF BUSINESS ADMINISTRATION

Macro Economics
Study on UNITED KINGDOM
(Group Assignment)

Submitted by: Register No:

Sagi Sampi P18FW21M0019

Vinayak Rao Gaikwad K P18FW21M0054

Ramanaboina Anand Kumar P18FW21M0154

Semester II
Batch 2021-2023

Under the Guidance & Supervision of

Prof. Rashmi Shetty
Assistant Professor, RVIM
PHASE 3
 FINANCIAL SYSTEM OF UNITED KINGDOM

The UK financial sector includes the activities of a wide range of firms, including retail banks,
building societies, investment banks and hedge funds, and is wider than the activities of financial
services firms located in the City and Canary Wharf. There are a several other sources of
information on the financial services sector. City UK represents the interests of the financial
services sector in the UK and publishes an annual assessment of the economic impact of the UK
financial services sector, most recently in July 2022.

In 2021, the financial services sector contributed £173.6 billion to the UK economy, 8.3% of
total economic output. The sector was largest in London, where around half of the sector’s
output was generated. The UK financial services sector was the fourth largest in the OECD in
2021 by its proportion of national economic output. Luxembourg’s financial service sector was
the largest in the OECD, contributing 25% of the country’s economic output.

There were 1.08 million financial services jobs in the UK in Q1 2022, 3.0% of all jobs. Exports
of UK financial services were worth £61.3 billion in 2021 and imports were worth £16.6 billion,
so there was a surplus in financial services trade of £44.7 billion. UK exports of financial
services to the EU have fallen notably since 2018 – between 2018 and 2021, the value of UK
exports of financial services to the EU fell by 19% in cash terms, while exports of financial
services to non-EU countries grew by 4%. In Q1 2022, the EU accounted for 34% of UK
financial services exports and the USA accounted for 31%.

Taxes on the financial services industry raised £28.8 billion in 2020/21, 4.1% of all taxes
collected that year according to data from HMRC. Research from PwC for the City of London
Corporation using a broader measure of taxes reported that the financial sector contributed £75.6
billion in taxes in the year to March 2020, 10% of total government receipts in 2019 and 2020.
Financial system provides:

• A payments system
• A mechanism for the pooling of funds
• A way to transfer economic resources across time, geography and industry
• A way to manage uncertainty and control risk
• Price information that helps co-ordinate decision-making
• A way to deal with the challenges of asymmetric information.

UK Regulatory Structure:

.
Contribution of Finance Sector in the UK Economy:

Financial sector contributed £173.6 billion to the UK economy in 2021, 8.3% of the total. 1 It
was the fifth largest sector in terms of overall economic output.

Regions wise Contribution in the Finance Sector of UK:

There is a wide disparity in the financial sector’s contribution to the economy across different
regions and countries of the UK. London accounted for over half of the total UK financial and
insurance sector’s economic output in 2020. The financial sector in London contributed £88.6
billion to the UK economy in 2020, 19% of London’s total economic output. This is a much
higher proportion than in any other part of the UK.
Financial Services jobs Region wise in UK:

The following chart shows the number of financial services jobs in each region of UK. London
has by far the most financial services jobs in 2022 – 404,787 or 37% of all the financial sector
jobs in the UK. Financial services account for around 6.7% of all jobs in London.

Trade in financial services:

In 2021, exports of financial services were worth £61.3 billion, while imports were worth £16.6
billion, resulting in trade surplus of £44.7 billion. The UK’s trade in financial services over the
last 20 years is shown below. The UK has maintained a trade surplus in financial services in each
of the last 20 years, peaking at £49 billion in 2018. UK exports of financial services peaked at
£65 billion in 2018. UK imports of financial services peaked in 2019, at £17 billion.
 BALANCE OF PAYMENTS IN UK
The Balance of Payments is a technical and umbrella term for an invaluable and detailed set of
economic data. The balance of payments demonstrate not only the interaction of an individual
economy with the rest of the world, but also contains a substantial volume of information
relevant to the nature of that individual economy as well as of global developments more
generally.

United Kingdom BoP: Financial Account data was reported at 10,744.000 GBP mn in Jun 2022.
This records a decrease from the previous number of 13,048.000 GBP mn for Mar 2022. United
Kingdom BoP: Financial Account data is updated quarterly, averaging 271.000 GBP mn from
Mar 1955 to Jun 2022, with 270 observations. The data reached an all-time high of 54,664.000
GBP mn in Sep 2016 and a record low of -12,314.000 GBP mn in Mar 1996.
Trade
The total trade balance increased from a deficit of £4.5 billion in Quarter 2 (Apr to June) to £8.2
billion in Quarter 3. Import and export flows continue to fluctuate as global economies continue
to adapt to the coronavirus (COVID-19) pandemic and changing processes following the UK
leaving the EU. In Quarter 3 the trade in goods deficit widened as exports in semi and finished
manufactured goods fell while imports of oil and other fuels increased. Trade in services surplus
position, which increased to £35.2 billion in Quarter 3, was strengthened by an increase in other
business and financial services exports.

Primary income
The primary income balance records income the UK receives and pays on financial and other
assets, along with compensation of employees.

The primary income deficit widened to £7.1 billion in Quarter 3 2021 as dividend payments
reached their pre-pandemic peak, increasing earnings on portfolio investment in the UK. A
stronger return on direct investment abroad has increased UK earnings (credits) in Quarter 3
partially offsetting the larger debits.

Financial account
A current account deficit places the UK as a net borrower with the rest of the world, indicating
that overall expenditure in the UK exceeds national income. The UK must attract net financial
inflows to finance its current (and capital) account deficit, which can be achieved through either
disposing of overseas assets to overseas investors or accruing liabilities with the rest of the
world.
International investment position
The international investment position (IIP) examines the UK’s balance sheet with the rest of the
world, measuring the difference between the net stock of assets and liabilities.

In Quarter 3 (July to Sept) 2021, the IIP recorded an increase in the value of its net liability
position to £523.3 billion from £512.3 billion in Quarter 2 (Apr to June) 2021.
 LITERACY IN UK

The literacy rate is defined by the percentage of the population of a given age group that can read
and write. The UK has a high literacy rate of over 99% among residents aged 15 and older. This
is attributed to the universal public education provided to UK residents, both in primary and
secondary schools. The Elementary Education Act 1870, commonly known as Forster's
Education Act, set the framework for schooling of all children between the ages of 5 and 12 in
England and Wales. This in fact brought a strong legal backing to make education compulsory to
children. But even before that United Kingdom tried their best to increase the literacy rate.

The rise in literacy in nineteenth-century Britain led to an increase in the size of the reading
public. Most of the rise was confined to the working classes and, as such, impacted them the
most, enabling more and more people to write letters (allowing them to maintain relationships
outside their immediate localities), fill their leisure hours with the reading of imaginative fiction
and newspapers, expand their employment opportunities, and follow and participate in politics.

Literacy rate of UK over the years*

Interpretation:

The increase of literacy pre nineteenth century was helmed by the initiative of Sunday schools.

Post 1800, due compulsory education acts the literacy rate increased more.

2003 was the year United Kingdom reached 99% literacy rate and post that there is very less data
available regarding literacy.

Interpretation:

This chart shows historical estimates of literacy in England over the last five centuries.

The historical estimates are based on the percentage of men women who could sign documents, a
very basic definition of literacy that is often used in historical research on education.

The first observations refer to men and women in the diocese of Norwich, which lies to the
Northeast of London. Here, the majority of men (61%) were unable to write their name in the
late 16th century; for women it was much lower.
By 1840 two-thirds of men and about half of women were literate in England. The expansion of
education led to a reduction in education gender inequality. Towards the end of the 19th century
the share had increased to almost three-quarters for both genders.

As the centre of the Industrial Revolution and one of the first countries that established
democratic institutions, England was in important aspects the centre of the development of
modernity.

The data shows that improvements in literacy preceded the Industrial Revolution and in many
ways the rise of living standards became only possible thanks to an increasingly better educated
public.

Widespread school education and even basic skills like literacy are a very recent achievement
that was enabled and at the same time required by the progress achieved in recent generations.