BRIEFING PAPER

Number 6193, 31 July 2019

Financial services:
contribution to the UK By Chris Rhodes

economy
Contents:
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

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2 Financial services: contribution to the UK economy

Contents
Summary 3
1. Measuring the contribution of the financial sector 4
2. Economic output 5
2.1 Economic output over time 5
2.2 Financial services in the regions and countries of the UK 7
2.3 International comparisons 8
3. Jobs in financial services 9
3.1 Jobs by region 10
4. Trade in financial services 11
4.1 Financial services trade with the EU 12
5. Taxation of the financial services industry 13

Cover page image copyright Attributed to:Canary Wharf / winter by George Rex.
Licensed under CC BY 2.0 / image cropped.
3 Commons Library Briefing, 31 July 2019

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 2018, the financial services sector contributed £132 billion to the UK economy,
6.9% of total economic output. The sector was largest in London, where 49% of the
sector’s output was generated.
The UK financial services sector was the seventh largest in the OECD in 2018 by its
proportion of national economic output. Luxembourg’s financial service sector was the
largest in the OECD, contributing 26% of the country’s economic output.
There were 1.1 million financial services jobs in the UK, 3.1% of all jobs.
Exports of UK financial services were worth £60 billion in 2017 and imports were worth
£15 billion, so there was a surplus in financial services trade of £44 billion.
43% of financial services exports went to the EU and 34% of financial services imports
came from the EU.
The sector contributed £29 billion in tax in the UK in 2017/18.

For more information on the impact of Brexit on the financial services sector, please see
the following Library briefing: Brexit and financial services.
4 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 October 2018:
Key Facts about the UK as an international financial centre 2018. The
City UK analysis uses different sources and so is not directly comparable
to the data used in this paper.
5 Commons Library Briefing, 31 July 2019

2. Economic output
Economic output is measured by Gross Value Added (GVA) which is
similar to GDP but is used to measure the contribution of part of the
economy, such as an industry or region.

2.1 Economic output over time

In 2018, financial and insurance services contributed £131.9 billion to
the UK economy, 6.9% of the total.
Economic output of the UK finance and insurance industry
Change on
£ billion, constant previous year % of total
£ billion, current (2015 prices) (constant) economy

1990 33.5 62.2 - 5.5%

1991 35.0 63.0 1.3% 5.5%
1992 36.3 61.0 -3.3% 5.5%
1993 43.5 62.7 2.8% 6.2%
1994 43.1 63.1 0.8% 5.9%
1995 47.5 64.3 1.8% 6.2%
1996 49.1 67.2 4.4% 6.0%
1997 50.8 72.2 7.5% 5.9%
1998 51.3 89.4 23.8% 5.7%
1999 48.9 90.9 1.7% 5.3%
2000 49.4 94.8 4.3% 5.1%
2001 51.4 98.6 4.0% 5.1%
2002 55.9 103.2 4.6% 5.3%
2003 65.2 109.9 6.5% 5.8%
2004 78.0 114.8 4.5% 6.6%
2005 93.8 122.7 6.9% 7.5%
2006 101.9 132.3 7.8% 7.7%
2007 119.2 139.1 5.1% 8.6%
2008 110.6 142.0 2.1% 7.7%
2009 128.5 142.0 0.0% 9.2%
2010 119.1 130.7 -7.9% 8.3%
2011 119.5 130.5 -0.2% 8.1%
2012 118.4 133.2 2.0% 7.8%
2013 123.1 130.2 -2.2% 7.8%
2014 126.2 127.9 -1.7% 7.7%
2015 119.1 124.2 -2.9% 7.0%
2016 128.6 128.6 3.5% 7.3%
2017 131.1 128.9 0.2% 7.1%
2018 131.9 126.6 -1.8% 6.9%

Source: ONS, Quarterly National Accounts, Q1 2019, Low Level Aggregates Table
ONS Series KL9O, KKK9, KKP5
Economic output in terms of Gross Value Added (GVA)
6 Financial services: contribution to the UK economy

Financial services economic output as a % of UK economy

10%

9%

8%

7%

6%

5%

4%

3%

2%

1%

0%
1990 1995 2000 2005 2010 2015

Source: ONS Series KKP5 and KKK9

Financial and insurance activities have grown as a proportion of total

economic output since the early 1990s.
There was strong growth during the early 2000s, followed by a steady
fall since the recession in 2008 and 2009.
In 2018, the sector contributed 6.9% of the UK economic output, down
from the peak of 9.2% in 2009.
7 Commons Library Briefing, 31 July 2019

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 half of the total UK financial and insurance sector’s GVA
in 2017.
The financial sector contributed £63.8 billion to London’s economy in
2017, 15% 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, 2017
% of regional % of UK financial
£ billions output services
London 63.8 15% 49%
South East 12.1 5% 9%
Scotland 9.2 7% 7%
North West 8.8 5% 7%
South West 7.2 6% 6%
Humber 6.3 5% 5%
East 6.2 4% 5%
West Midlands 5.8 4% 4%
Wales 2.8 5% 2%
East Midlands 2.8 3% 2%
North East 2.3 4% 2%
Northern Ireland 1.7 4% 1%

United Kingdom 129.1 7% 100%

Source: ONS, Regional Gross Value Added (balanced) by industry, Dec 2018
SIC code Section K; Note: UK totals include GVA not assigned to a region/country
8 Financial services: contribution to the UK economy

2.3 International comparisons

The UK’s financial services sector contributed the seventh highest
proportion of a country’s economic output in the OECD countries, 7%
in 2018. 1
Luxembourg’s reliance on the financial services is a significant outlier
(the sector accounts for 26% 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, 2018

Luxembourg 26%
Australia* 9%
Switzerland 9%
United States* 8%
Canada* 7%
Ireland 7%
United Kingdom 7%
Netherlands 7%
New Zealand* 6%
Belgium 6%
Denmark 6%
Iceland* 6%
Korea* 5%
Chile 5%
Israel* 5%
Norway 5%
Portugal 5%
Italy 5%
Mexico* 4%
Japan* 4%
Poland 4%
Czech Republic 4%
Spain 4%
Austria 4%
Estonia 4%
France 4%
Slovenia 4%
Germany 4%
Sweden 4%
Turkey* 4%
Latvia 4%
Greece 4%
Hungary 3%
Slovak Republic 3%
Finland 3%

0% 5% 10% 15% 20% 25% 30%

Source: OECD, Value Added by Activity: Financial Services, 2018

*= data for 2017 or most recent date available

1
OECD, Value added by activity, accessed July 2019, Finance and insurance
9 Commons Library Briefing, 31 July 2019

3. Jobs in financial services

In Q1 2019, there were 1.1 million jobs in the financial and insurance
sector in the UK, 3.1% of all jobs.
The number of jobs in the financial services sector has remained broadly
steady over the past few decades, but the proportion of jobs in this
industry has fallen by about one percentage point since the early 1990s
as the number of jobs in the whole economy has grown.

Jobs in the UK financial services

sector, 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 1,116 3.2%
2018 1,122 3.2%
2019 1,116 3.1%

Source: ONS, Workforce jobs data, Q1 each year, via NOMIS database
Financial and insurance activities, SIC Section K
10 Financial services: contribution to the UK economy

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 2019 – 398,000 or 49% of all the sector’s jobs in the
UK.
In the UK as a whole, 7% of all jobs are in financial services. In London,
the financial services account for 15% of jobs.

Chartintitle
Jobs financial services by UK country & region, Q1 2019
Thousands

London 398

South East 122

North West 97

East 86

Scotland 84

South West 79

Yorks & Humber 75

West Midlands 63

East Midlands 33

Wales 33

North East 27

Northern Ireland 20

0 50 100 150 200 250 300 350 400

Source: ONS, Workforce jobs data, Q1 2019, via NOMIS database

Jobs in financial services by UK country & region, Q1

2019
% of UK financial
Thousand jobs % of regional jobs services jobs
London 398 15% 49%
South East 122 5% 9%
North West 97 7% 7%
East 86 5% 7%
Scotland 84 6% 6%
South West 79 5% 5%
The Humber 75 4% 5%
West Midlands 63 4% 4%
East Midlands 33 5% 2%
Wales 33 3% 2%
North East 27 4% 2%
Northern Ireland 20 4% 1%
UK 1,116 7% 100%
Source: ONS, Workforce jobs data, Q1 2019, via NOMIS database
11 Commons Library Briefing, 31 July 2019

4. Trade in financial services

The UK has a trade surplus in financial and insurance activities (exports
exceed imports in the sector) of £44 billion.

UK trade in financial services

2007-17, £ billions
Exports Imports Balance
2007 47.5 9.4 38.1
2008 46.8 10.5 36.3
2009 47.6 9.1 38.5
2010 49.0 8.8 40.2
2011 56.1 9.9 46.2
2012 53.8 9.1 44.7
2013 55.1 11.6 43.4
2014 50.2 11.8 38.4
2015 52.0 13.8 38.3
2016 56.0 15.1 40.9
2017 59.6 15.3 44.4
Source: ONS, Pink Book 2018, Table 3.5
Note: All data includes FISIM and non-FISIM trade (FISIM=Financial Intermediation Services Indirectly
Measured)

In 2017, exports of financial services were worth £59.6 billion, while

imports were worth £15.3 billion, resulting in trade surplus of
£44.4 billion. Financial services made up 23% of all UK service exports
and 9% of all service imports.
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 £46 billion in 2011.
UK exports of financial services peaked at £60 billion in 2017; UK
imports of financial services also peaked in 2017, at £15 billion.

UK trade in financial services, 1997 to 2017, £ billions

60
Exports
50

Balance
40

30

20

10 Imports

0
1997 2000 2003 2006 2009 2012 2015

Source: ONS, Pink Book 2018, Table 3.5

12 Financial services: contribution to the UK economy

4.1 Financial services trade with the EU

In 2017, exports of financial services to the EU were worth £26 billion
(43% of all UK financial service exports), while imports from the EU
were worth £5 billion (34% of UK imports of financial services).
Exports of financial services to non-EU countries in 2017 were worth
£34 billion (57% of all UK financial service exports), while imports from
non-EU countries were worth £10 billion (66% of UK imports of
financial services. 2

2
Source: ONS, Pink Book 2018, Table 9.13, July 2018
13 Commons Library Briefing, 31 July 2019

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. 3
In 2017/18, these taxes raised £28.5 billion, 3.8% of all taxes collected
that year.
The majority of this was from PAYE (income tax and national insurance)
which raised £19.1 billion with corporation tax raising £4.9 billion and
the bank levy raising £2.8 billion. The bank surcharge was introduced in
January 2016. It raised £1.8 billion in 2017/18.
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 - 1.6 - 20.5
2012-13 17.8 2.2 - 1.6 - 21.6
2013-14 17.6 1.6 - 2.2 - 21.3
2014-15 17.9 2.3 - 2.7 - 22.9
2015-16 17.8 3.2 - 3.4 0.0 24.4
2016-17 18.4 4.8 - 3.0 1.1 27.3
2017/18 19.1 4.9 - 2.8 1.8 28.5
Sources: HMRC, PAYE and Corporate Tax receipts from the banking sector: 2018

Total UK tax receipts from the banking sector, £ billions,

nominal terms
30

29
25 27
24 24
23 23 23
20 22
21 21 21

15 18 17

10

0
2005-06 2007-08 2009-10 2011-12 2013-14 2015-16 2017/18

Source: HMRC, PAYE and Corporate Tax receipts from the banking sector: 2018

3
HMRC, PAYE and Corporate Tax receipts from the banking sector: 2018, September
2018
14 Financial services: contribution to the UK economy

The City of London Corporation publishes estimates of financial sector

tax receipts. 4 This is based on research by PricewaterhouseCoopers
(PwC), which collects data from a survey of financial services companies.
The PwC research uses a broader measure of tax contributions
compared to HMRC. 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
£75.0 billion or 10.9% of total government receipts in 2017/18.

4
City of London Corporation/PwC, UK financial services sector makes record tax
contribution, December 2018
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Number 6193
provided subject to the conditions of the Open Parliament Licence.
31 July 2019