By Georgina Hutton

1 September 2022
Financial services: contribution
to the UK economy

Summary
1 Measuring the contribution of the financial sector
2 Economic output
3 Jobs in financial services
4 Trade in financial services
5 Taxation of the financial services industry

commonslibrary.parliament.uk
Number 6193 Financial services: contribution to the UK economy

Contributing Authors
Matthew Ward

Image Credits
Canary Wharf / winter by George Rex. Licensed under CC BY 2.0 / image
cropped

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2 Commons Library Research Briefing, 1 September 2022

Financial services: contribution to the UK economy

Contents

Summary 5

1 Measuring the contribution of the financial sector 6

2 Economic output 7

2.1 Economic output over time 7

2.2 Financial services in the regions and countries of the UK 10
2.3 International comparisons 10
UK competitiveness as a global financial centre 12

3 Jobs in financial services 13

3.1 Jobs by region 14

4 Trade in financial services 16

4.1 Financial services trade with the EU 17

4.2 Financial services trade with non-EU countries 19

5 Taxation of the financial services industry 21

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Financial services: contribution to the UK economy

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Financial services: contribution to the UK economy

Summary

This paper provides information on the economic output of the financial

services sector and international comparisons; the number of jobs in the
sector; statistics on the sector’s exports and imports; and the amount of tax it
contributes to the Exchequer.

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 2019/20.

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:
Key Facts about UK-based financial and related professional services.

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 Financial services: contribution to the UK economy

1 Measuring the contribution of the

financial sector

Measures of the financial sector usually include the activities of a wide range
of firms, including retail banks, building societies, investment banks and
hedge funds, and are wider than the activities of financial services firms
located in the City and Canary Wharf. Mostly, ‘financial services’ in this
briefing paper are defined as the financial and insurance activities sector,
Standard Industrial Classification Section K.

These statistics usually measure the contribution of the financial services

and/or related sectors on a stand-alone basis. To some extent they may
under-estimate the sector’s total contribution to the UK economy. This is
because a well-functioning financial sector may have positive “spill-over”
effects for other sectors of the economy. For example, it may increase firms’
access to credit and therefore help other sectors to grow.

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:
Key Facts about UK-based financial and related professional services.

The City UK analysis uses different sources and so is not directly comparable
to the data used in this paper.

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 Financial services: contribution to the UK economy

2 Economic output

2.1 Economic output over time

Financial and insurance services 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. 2

Financial and insurance activities have grown as a proportion of total

economic output since the early 2000s.

There was strong growth during the early 2000s, but since the financial crisis
in 2008/9 the size of the sector has remained relatively stable as a proportion
of total economic output. In 2020, the sector contributed 8.6% of the UK
economic output, down from a peak of 9.1% in 2009.

This trend differs from data published prior to 2021 due to ONS revisions to
output data that year (see Box 1).

Financial services economic output

% of total UK economy, 1990–2021
10%
9%
8%
7%
6%
5%
4%
3%
2%
1%
0%
1990 1995 2000 2005 2010 2015 2020

Source: ONS, Low level aggregates, series KKP5 and KKK9, accessed 25 August 2022.

1
In terms of Gross Value Added (GVA). GVA is similar to GDP but used to measure the contribution of
part of the economy, such as an industry or region. In brief, GVA is the contribution of part of the
economy, minus any costs incurred in production.
2
Of the 20 main industrial sectors based on Standard Industrial Classification sections.

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Financial services: contribution to the UK economy

1 Revisions to financial services economic output, 2021

As part of its annual ‘Blue Book’, which presents the UK national accounts, the
ONS implemented technical changes to how it calculates economic output
data. 3
For the financial services sector, this included changes to the survey used to
better capture the development of the financial services industry in recent
years. In particular, the survey enabled the contribution of Other Financial
Institutions (OFIs) and financial auxiliaries, such as administration of financial
markets, risk and damage evaluation and fund management activities, to be
better represented.
These changes led to financial services output being higher as a proportion of
total UK economic output compared to previously published data. 4 For
example, prior to the 2021 revisions, financial services output in 2019 was
reported as £124.9 billion, or 6.3% of UK economic output. After revisions, this
is now £164.8 billion or 8.7% of total economic output.
Growth in the sector is now lower on average in the years leading up to the
financial crash, and higher in the last few years.

3
ONS, In the balance – How we are improving our estimates of GDP, 28 June 2021; ONS, Impact of
Blue Book 2021 changes on current price and volume estimates of gross domestic product, 28 June
2021.
4
ONS, In the balance – How we are improving our estimates of GDP, 28 June 2021; ONS, Impact of
Blue Book 2021 changes on current price and volume estimates of gross domestic product, 28 June
2021.

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Financial services: contribution to the UK economy

Economic output: UK finance and insurance industry

£ billion £ billion % change on % of total
(current prices) (2019 prices) previous year economy
1990 37.5 105.0 - 6.1%
1991 39.3 106.3 1.2% 6.1%
1992 40.7 102.8 -3.3% 6.1%
1993 48.4 105.5 2.6% 6.9%
1994 48.0 106.2 0.7% 6.5%
1995 52.4 108.2 1.9% 6.8%
1996 54.5 112.8 4.2% 6.6%
1997 56.2 118.5 5.1% 6.5%
1998 57.7 122.6 3.4% 6.4%
1999 56.3 120.4 -1.8% 6.0%
2000 57.3 122.4 1.6% 5.8%
2001 58.8 116.0 -5.2% 5.7%
2002 63.0 129.9 11.9% 5.9%
2003 72.1 139.8 7.7% 6.4%
2004 83.0 149.8 7.1% 7.0%
2005 98.1 159.7 6.6% 7.8%
2006 105.1 166.1 4.0% 7.9%
2007 122.7 189.6 14.1% 8.8%
2008 116.5 188.2 -0.7% 8.1%
2009 128.8 180.8 -3.9% 9.1%
2010 126.6 167.6 -7.3% 8.7%
2011 130.2 165.6 -1.2% 8.5%
2012 130.5 166.6 0.6% 8.6%
2013 137.0 159.5 -4.3% 8.5%
2014 141.9 154.2 -3.3% 7.9%
2015 136.3 151.4 -1.8% 8.4%
2016 151.3 162.9 7.6% 8.6%
2017 160.5 168.4 3.4% 8.5%
2018 165.4 167.5 -0.5% 8.2%
2019 164.8 164.8 -1.6% 8.7%
2020 164.7 159.7 -3.1% 8.7%
2021 173.6 162.4 1.7% 8.3%

Source: ONS, Quarterly National Accounts, Low Level Aggregates Table, accessed 25 August 2022. Series KL9O,
KKK9, KKP5. Economic output in terms of Gross Value Added (GVA).

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 Financial services: contribution to the UK economy

2.2 Financial services in the regions and countries

of the 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. 5

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: economic output by UK country & region

2020

£ billions % regional output % UK financial services

London 88.6 19% 53%
South East 15.0 5% 9%
Scotland 11.0 8% 7%
North West 10.4 6% 6%
South West 8.6 6% 5%
East of England 8.0 5% 5%
Yorks & Humber 7.7 6% 5%
West Midlands 7.3 5% 4%
Wales 3.6 5% 2%
East Midlands 3.7 3% 2%
North East 2.5 5% 1%
Northern Ireland 1.7 4% 1%

United Kingdom 168.0 9% 100%

Notes: Figures are not comparable to Section 2.1 due to revisions to national statistics. UK total includes
output not assigned to a region/country.
SIC code Section K, current prices.
Source: ONS, Regional Gross Value Added (balanced) by industry, 30 May 2022;

2.3 International comparisons

The UK financial services sector was the fourth largest of OECD countries in
2021 by its proportion of national economic output (8.3%), down from third
highest in 2020. 6 This is up from ninth highest reported prior to 2020, due to

5
GVA is similar to GDP but used to measure the contribution of part of the economy, such as an
industry or region. In brief, GVA is the contribution of part of the economy, minus any costs incurred
in production
6
OECD, Value added by activity, accessed December 2021, Finance and insurance

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Financial services: contribution to the UK economy

changes to the way that the ONS calculates the economic contribution of the
UK financial services sector (see Section 2.1).

Luxembourg’s reliance on the financial services is a significant outlier (the

sector accounts for 25% of economic output in Luxembourg). This is because
Luxembourg’s economy is relatively small and many of the major European
financial institutions are based there.

Financial services as a % of total economy

OECD countries, 2021
Luxembourg 25%
Switzerland 9%
United States* (2020) 8%
UK 8%
Australia* (2020) 8%
Canada* (2018) 7%
Iceland 6%
South Korea* (2020) 6%
Belgium 6%
New Zealand* (2019) 6%
Netherlands 6%
Colombia* (2020) 5%
Denmark 5%
Israel* (2020) 5%
Portugal 5%
Chile 5%
Italy 5%
Ireland 5%
Estonia 5%
Mexico* (2020) 5%
Japan* (2020) 4%
Sweden 4%
Norway 4%
Spain 4%
Austria 4%
Greece 4%
Czech Republic 4%
Slovenia 4%
France 4%
Poland 4%
Germany 4%
Hungary 4%
Latvia 3%
Finland 3%
Turkey 3%
Lithuania 3%
Slovakia 3% * data for most recent date available

Source: OECD, Value Added by Activity: Financial Services, accessed 23 August 2022.

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Financial services: contribution to the UK economy

UK competitiveness as a global financial centre

The Global Financial Centres Index (GFCI) is a twice-yearly index comparing
the competitiveness of the world’s leading financial centres, published by
Z/Yen (a City of London think tank) and the China Development Institute (a
China-based think tank). It takes into account a number of factors, including
reputation, quality of infrastructure, human capital and business
environment, and responses to questionnaires. 7

In March 2022 GFCI ranked London second in the world (behind New York),
where it has been since March 2018. 8 Before then it was ranked first. 9 The
report stated that London had fallen back in the ratings, the largest fall of
any of the top 20 centres, giving New York “a clear lead”.

Edinburgh was ranked 21st, up from 22nd in September 2021. 10 European

capitals scoring highly included Paris (11th), Frankfurt (16th), Amsterdam (19th)
and Geneva (25th).

7
See The Global Financial Centres Index 31, March 2022, pp2-4 and Appendix 3 for methodology
8
See The Global Financial Centres Index 31, March 2022.
9
See The Global Financial Centres Index 23, March 2018
10
See The Global Financial Centres Index 31, March 2022.

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 Financial services: contribution to the UK economy

3 Jobs in financial services

In Q1 2022, there were 1.08 million jobs in the financial and insurance sector in
the UK, 3.0% of all jobs. 11

The number of jobs in the financial services sector has remained broadly
steady since the early 1990s, but the proportion of all jobs represented by
financial services has fallen by about one percentage point as the number of
jobs in the whole economy has grown.

Jobs in UK finance and insurance industry

Million jobs, annual data

1.4

1.2

0.8

0.6

0.4

0.2

0
March March March March March March March March March
1982 1987 1992 1997 2002 2007 2012 2017 2022

11
Note this does not necessarily represent the number of people employed as individuals may hold
more than one job.

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 Financial services: contribution to the UK economy

Jobs in UK financial services

Q1 each year

Thousand jobs % of all jobs

1982 874 3.4%
…
1992 1,113 4.0%
…
2002 1,203 4.0%
2003 1,191 3.9%
2004 1,174 3.8%
2005 1,177 3.8%
2006 1,159 3.7%
2007 1,174 3.7%
2008 1,201 3.7%
2009 1,206 3.8%
2010 1,107 3.5%
2011 1,129 3.6%
2012 1,155 3.6%
2013 1,139 3.5%
2014 1,124 3.4%
2015 1,117 3.3%
2016 1,119 3.3%
2017 1,115 3.2%
2018 1,125 3.2%
2019 1,132 3.2%
2020 1,138 3.2%
2021 1,128 3.3%
2022 1,082 3.0%

Source: ONS, Workforce jobs data, Q1 each year, via NOMIS database, 25 August 2022
Financial and insurance activities, SIC Section K

3.1 Jobs by region

The following chart shows the number of financial services jobs in each region
and country of the 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.

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Financial services: contribution to the UK economy

Jobs in financial services by UK country & region

Thousands, Q1 2022
London 405

South East 128

North West 93

Scotland 89

South West 73

West Midlands 67

East 59

Yorks & The Humber 57

East Midlands 39

North East 26

Wales 25

Northern Ireland 20

Source: ONS, Workforce jobs data, Q1 2022, via NOMIS database, 25 August 2022.

Jobs in financial services, UK country & region

Q1 2022

Thousand jobs % of regional jobs % UK financial services

London 405 6.7% 37.4%

South East 128 2.6% 11.8%
North West 93 2.4% 8.6%
Scotland 89 3.2% 8.3%
South West 73 2.4% 6.7%
West Midlands 67 2.3% 6.2%
East 59 1.8% 5.4%
Humber 57 2.1% 5.3%
East Midlands 39 1.7% 3.6%
North East 26 2.2% 2.4%
Wales 25 1.7% 2.3%
Northern Ireland 20 2.2% 1.9%

United Kingdom 1,082 3.0% 100.0%

Source: ONS, Workforce jobs data, Q1 2022, via NOMIS database, 25 August 2022.

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 Financial services: contribution to the UK economy

4 Trade in financial services

The UK had a trade surplus in financial and insurance activities (exports

exceed imports in the sector) of £45 billion in 2021.

UK trade in financial services

2007–2021, £ billions

Exports Imports Balance

2007 47.8 8.5 39.3
2008 48.4 9.0 39.5
2009 49.2 7.7 41.5
2010 49.7 8.4 41.2
2011 56.4 9.3 47.0
2012 54.0 8.7 45.3
2013 55.9 10.7 45.2
2014 51.2 10.8 40.4
2015 53.1 11.3 41.7
2016 58.6 12.7 45.9
2017 60.9 13.3 47.7
2018 64.5 15.6 48.9
2019 62.7 16.8 45.9
2020 64.2 16.3 47.9
2021 61.3 16.6 44.7
Source: ONS series FJPK and FJRE
Note: All data includes FISIM and non-FISIM trade (FISIM=Financial Intermediation Services Indirectly Measured).

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. Financial
services made up 20% of all UK service exports and 9% of all service imports
in 2021. 12

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.

12
ONS, UK trade in services: service type by partner country

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 Financial services: contribution to the UK economy

UK trade in financial services

£ billions, 1997–2021
70

60 Exports

50
Balance
40

30

20
Imports
10

0
1997 2000 2003 2006 2009 2012 2015 2018 2021

Source: ONS series FJPK and FJRE

4.1 Financial services trade with the EU

In 2021, exports of financial services to the EU were worth £20.1 billion (33% of
all UK financial service exports), while imports from the EU were worth
£4.2 billion (25% of UK imports of financial services). 13

Between 2019 and 2020, the value of UK financial services exports to the EU
fell by 4% in cash terms. This was less severe than the change in all UK
service exports to the EU - over the same period total UK service exports to
the EU fell by 12%.
In 2020, the fall in financial services exports to the EU was most pronounced
in Q2 and Q3, owing to disruptions in economic activity caused by the
coronavirus pandemic – the value of UK service exports to the EU fell by 9% in
cash terms in Q2 compared to Q1 and by 14% in Q3 compared to Q2.
Financial service exports to the EU continued to fall in 2021, falling by a
further 10% in cash terms between 2020 and 2021. Over the same period, the
value of all UK service exports to the EU grew by 1%. Compared to pre-covid
levels of trade, financial services exports to the EU were 17% lower in Q1 2022
than Q1 2020.

13
ONS, UK trade in services: service type by partner country, July 2022.

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Financial services: contribution to the UK economy

UK financial services exports to the EU

% change on quarter, Q1 2020 - Q1 2022
20%
15%
10%
5%
0%
-5%
-10%
-15%
-20%
Q1 2020 Q2 2020 Q3 2020 Q4 2020 Q1 2021 Q2 2021 Q3 2021 Q4 2021 Q1 2022

Source: ONS, UK trade in services: service type by partner country

This fall is particularly evident in exports of “explicitly charged and other

financial services” 14 (which make up the vast majority of UK financial service
exports) to a small number of high value EU export markets.
Between Q1 2020 and Q1 2022, exports of explicitly charged and other
financial services to the Netherlands fell by 28% in cash terms, while exports
to Germany fell by 22%, exports to France fell 10% and exports to Ireland fell
by 15%. These four countries account for the majority of UK financial service
exports to the EU, accounting for over half of all UK financial service exports
to the EU and over half of UK exports of explicitly charged and other financial
services to the EU.
The ONS explained that the fall in the value of financial services exports to the
EU in Q2 2021 is likely to be at least partly a result of the end of the Brexit
transition period and the related rules changes, with the UK-EU Trade and Co-
operation Agreement (TCA) including limited provision for access in financial
services. 15
Outside the single market, UK service providers no longer have the
“automatic right to offer services across the EU” and must comply with the
rules of individual EU countries as they no longer benefit from passporting
rules, where authorisations issued by one EU country allow for access across
the whole single market. 16 The Library briefing The UK-EU trade deal: financial
services explains the deal’s provisions on financial services and its impact.

14
This includes financial advisory services, custody of financial assets or bullion, financial asset
management, monitoring services, liquidity provision services, merger and acquisition services,
credit rating services, stock exchange services and trust services
15
ONS, The impacts of EU exit and coronavirus (COVID-19) on UK trade in services: November 2021, 22
November 2021
16
European Commission, Questions & Answers: EU-UK Trade and Cooperation Agreement, 24
December 2021

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 Financial services: contribution to the UK economy

4.2 Financial services trade with non-EU countries

Exports of financial services to non-EU countries in 2021 were worth

£41.3 billion (67% of all UK financial service exports), while imports from non-
EU countries were worth £12.4 billion (75% of UK imports of financial
services). 17

Between 2019 and 2020, the value of UK financial service exports to non-EU
countries increased by 6%, while the value of all service exports to non-EU
countries fell by 6%. This growth was in spite of covid-related falls in exports
of financial services to non-EU countries in Q2 and Q3 2020.

This growth in the value of UK financial service exports to non-EU countries

was concentrated on a small number of high value export markets, in
particular Canada, Switzerland, Hong Kong, Japan and the USA. Combined,
these five countries represent a growing share of all UK financial services
exports – these five countries accounted for 40% of UK financial services
exports in 2019, rising to 44% in 2021. Overall, non-EU countries accounted for
67% of UK financial services exports in 2021, up from 63% in 2019.

Between 2020 and 2021, the value of UK exports of financial services to non-
EU countries fell very slightly, by 1% in cash terms, while the value of all UK
service exports to non-EU countries grew by 1%.

The USA overtook the EU as the UK’s largest export market for financial
services in Q1 and Q2 2021, with the USA accounting for 35% and 34%
respectively of UK financial services exports in these two quarters, compared
to the EU’s total of 32% and 33%.
Between Q3 2021 and Q1 2022, the EU has returned to being the UK’s single
largest export market for financial services.

UK financial services exports

% total, Q1 2016 - Q1 2022
50%
EU USA
40%

30%

20%

10%

0%
2016 2017 2018 2019 2020 2021 2022

17
Source: ONS, UK trade in services: service type by partner country, July 2022

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Financial services: contribution to the UK economy

Source: ONS, UK trade in services: service type by partner country

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 Financial services: contribution to the UK economy

5 Taxation of the financial services

industry

Her Majesty’s Revenue and Customs (HMRC) publishes details of receipts from
the banking sector from income tax, national insurance contributions,
corporation tax, the bank payroll tax and the banking levy. 18 The Library
briefing paper, Taxation of banking provides further discussion.

In 2020/21, these taxes raised £28.8 billion, 4.1% of all taxes collected that
year. 19

The majority of this was from PAYE (income tax and national insurance) which
raised £21.0 billion. Corporation tax raised £4.1 billion and the bank levy
raised £2.3 billion. The bank surcharge was introduced in January 2016; it
raised £1.4 billion in 2020/21.

UK tax receipts from the banking sector

£ billions
Corporation Bank Payroll Bank
PAYE Tax Tax Bank Levy Surcharge Total

2005/06 13.6 7.0 - - - 20.6

2006/07 15.9 7.3 - - - 23.2
2007/08 16.7 6.6 - - - 23.3
2008/09 14.0 3.9 - - - 17.9
2009/10 15.2 2.1 - - - 17.3
2010/11 17.5 3.5 3.4 - - 24.4
2011/12 17.6 1.3 0.0 1.6 - 20.5
2012/13 17.8 2.2 0.0 1.6 - 21.6
2013/14 19.9 1.6 - 2.2 - 23.7
2014/15 20.2 2.3 - 2.7 - 25.2
2015/16 20.6 3.3 - 3.4 0.0 27.2
2016/17 21.4 4.8 - 3.0 1.1 30.3
2017/18 21.1 4.9 - 2.8 1.8 30.6
2018/19 20.9 4.7 - 2.6 1.9 30.1
2019/20 20.7 5.0 - 2.5 2.0 30.2
2020/21 21.0 4.1 2.3 1.4 28.8

Source: HMRC, PAYE and Corporate Tax receipts from the banking sector (2021)

18
HMRC, PAYE and Corporate Tax receipts from the banking sector (2020), September 2020.
19
Based on National Accounts Taxes. Office for Budget Responsibility, Public finances databank, July
2022, series GCSU.

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Financial services: contribution to the UK economy

The City of London Corporation publishes estimates of financial sector tax

receipts. 20 These figures are estimates largely based on a survey of 52
financial services companies conducted by PricewaterhouseCoopers (PwC).

The PwC research uses a broader measure of tax contributions compared to

the HMRC figures. As well as income taxes, national insurance contributions
and corporation taxes, PwC includes VAT, business rates and other taxes.
While the HMRC figures are for taxes paid by the banking sector, the PwC
survey also includes insurance companies.

The PwC estimates include both taxes paid by the sector itself (such as
corporation tax and business rates) and taxes collected by the sector on
behalf of Government, such as income tax and insurance premium tax, for
example, which are paid by employees and consumers respectively.

The PwC research indicates that the financial sector contributed £75.6 billion
in taxes in the year to March 2020, 10% of total government receipts in
2019/20. 21

20
City of London Corporation/PwC, Total tax contribution of UK financial services, updated 9 February
2021.
21
City of London Corporation and PwC, Total tax contribution of UK financial services in 2020 (PDF,
3.6MB), February 2021.

22 Commons Library Research Briefing, 1 September 2022

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