When Queen Victoria opened the fabulous Crystal Palace at the Great Exhibition of 1851 the UK was without a doubt the world’s leading industrial power, controlling more than half of the world’s production of iron, coal, and cotton cloth – the staples of the industrial revolution. This dominance in manufacturing and industrialisation continued for many decades, and even in the 1970s manufacturing contributed more than 25% of the UK’s GDP. While we still lead the world in some areas of manufacturing, particularly high-tech industries such as aerospace, the UK’s most important private industries are now financial and professional services.
The City of London has been a global centre for business for hundreds of years, constantly reinventing itself to reflect the needs of the country and the world. In the 19th century the Pool of London was the busiest port in the world, with thousands of ships docking at London’s wharfs to accommodate the booming industrial trade from the heartland of the UK, known as the workshop of the world. Following the decline in British manufacturing the City has developed itself as a leading centre of finance to service not only British, but European demands for financial and professional services. This outward focus is only matched by the likes of Singapore and Hong Kong. The City is still transforming itself to stay with the times, adding a vibrant fintech industry to the other industries where we are world leading, such as legal services, insurance and shipbroking.
In today’s world, financial services touch our lives every day, with banks and investment firms protecting our money, and helping us save and grow our money for the future. Our investment and savings industry has been so successful that the average pensioner household no longer relies on state benefits for the bulk of its income. Our well established insurance industry ensures that there is ample competition for consumers, allowing best value to be achieved. London’s status as the world’s leading financial hub has contributed to it becoming a centre for green finance and carbon trading.
The financial and professional services industries employ more than 2.2 million people across the country, which equates to roughly one in every fourteen jobs. In fact, two thirds of these jobs outside of London. JP Morgan employs more than 4,000 people in Bournemouth, making it the largest private employer in Dorset. Citibank employs 2,000 people in Belfast. Bank of America Merrill Lynch employs 1,000 people in Chester. These jobs are often high quality, skilled positions, providing fruitful opportunities to new generation of Britons.
These industries are vital to the functioning of our economy, with financial services alone providing more than £66bn in taxes to the exchequer, funding everything from the NHS, to paying the salaries of teachers and soldiers. The UK is the world’s largest exporter of financial services, generating a trade surplus of approximately £47bn a year.
UK banks cater for around four million small businesses, lending to finance expansion and investments that benefit millions of people across the UK. Similarly, large companies from across the world come to London to list their companies on our stock market and raise money to fund expansion and growth.
The financial crisis of 2007-2009 rightly led to questions about the role of financial services in the UK, but many lessons have been learned, and important reforms have been undertaken. Risk is managed much more effectively in banks and lenders across the world, and a more civically minded culture is taking hold.
Having world-class financial and professional services industries are just two of the reasons why London is one of the world’s leading metropolitan areas. London leads the world in art, theatre, architecture and film, drawing experts from all over the world, enriching the lives of millions of people across the capital and country. This is made possible by having a strong and growing economy, with successful companies supporting the arts. The City of London Corporation is the country’s fourth largest funder of culture, after the Government, Lottery and BBC.
The financial services industry is also the most charitable in the UK, giving more than £245 million in cash to charities in 2013 – roughly a third of all charitable donations in the UK. The contribution in kind – most importantly staff time – is even greater.
There needs to be a thorough debate on the issues that Brexit brings up, with businesses carefully assessing the impact of the alternatives and feeding those assessments into the policy-making process. It is important that the Government fully takes into account in the Brexit negotiations the role of the financial and professional services industries, not to protect “the City” but rather to protect jobs, tax revenue and the efficient functioning of the economy.
The UK must continue to have a thriving financial and professional services industry and to remain influential on the international stage, and to continue to be an attractive place to do business. This should be the guiding principle in the Brexit negotiations, not abstract notions of hard or soft Brexit.
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