In my last blog post, I analysed trends in the UK’s financial services exports to the EU over the past seven years. In that post I used a relatively basic metric of growth rates, noting that “between 2016 and 2023, financial services exports from the UK to the EU increased by almost 50%, thanks to a 22% surge in growth in 2023”.
We have now built on this work in three ways: firstly, by broadening out to look at related professional services exports as well as financial services exports; secondly, by analysing industry exports globally, rather than just those going to the EU; and finally, by looking at contributions to growth rather than simple growth rates.
Contributions to growth assess the specific impact of different components on an overall growth rate, providing a more nuanced understanding of what drives aggregate growth. Because contribution calculations take into account components’ share of the total as well as the rate of growth, they can provide a more detailed picture than simple growth rates, since the latter can be misleading because of the arithmetic effects of small starting-point values.
Our analysis shows that the value of UK financial and related professional services exports increased by 56% between 2016 and 2023. Financial services (finance activities plus insurance) accounted for 62% of this increase, and related professional services (legal, accounting and management consulting services) accounted for 38% of the increase.
Contributions by sector
Looking just at financial services, we find that between 2016 and 2023, insurance exports increased by 81%, almost three times the growth of financial activities exports (32%). However, financial activities made a much larger contribution to growth, given that its exports are around four times the value of insurance exports:
Considering sub-sectors, management consultancy services and Financial Intermediation Services Indirectly Measured (FISIM)[1] contributed most to the growth of total financial and related professional services exports, representing 17 and 11 percentage points out of the total growth of 56%, respectively.
Within related professional services, management consulting contributed the most to the total financial and related professional services export growth of 56%, according to our estimates. It and accounting services both showed a significant increase in exports over the period, both at 164%. However, the levels of exports for management consulting were about five times higher than for accounting (explaining its much higher contribution to growth).
Contributions by country
We also analysed the contributions that key export markets have made to the growth of the UK’s financial and related professional services exports. This analysis reinforces a point made repeatedly in our Economic Research over the years, that the UK’s financial and related professional services trade is predominantly with other Advanced Economies (indeed, most financial and related professional services trade globally is conducted among Advanced Economies). The US (26 percentage points), the EU (14), and Switzerland (2) were the main drivers of the 56% growth in industry exports. In contrast, between 2016 and 2023, Singapore (102%), Hong Kong (97%), and Saudi Arabia (91%) showed the highest rates of growth for UK financial and related professional services exports.
The US deserves special mention in this analysis. The other leading industry export destinations in terms of growth demonstrated fast growth from a low base: £0.6-1.2bn in 2016. In contrast, and uniquely among all countries, industry exports to the US showed fast growth from a high base: around £27bn in 2016. It is this combination that made its contribution to industry export growth so marked: fully half of the total growth over 2016-23 came from exports to the US. Given its particular importance, I examined the UK-US financial services trade relationship in more detail in this blog post earlier this year.
We have written extensively in the past about the UK’s financial and related professional services exports, both in this blog and in our full reports. But this additional analysis sheds new light on which parts of the industry, and which export destinations, have been driving its export growth. Used in conjunction with other metrics, such as export growth rates, we can see a fuller picture of the landscape for industry exports—which in turn could facilitate more informed policymaking based on enhanced understanding of UK industry competitiveness and trends in global demand.
[1] Financial intermediation services indirectly measured, or FISIM, is the counterpart to Explicitly charged financial services (services whose fees are explicit, such as commission fees). FISIM is conceptually more complex, but broadly speaking it “comprises financial service output for which producers do not explicitly charge, measured by interest rate spreads. For more detail, see https://www.imf.org/external/pubs/ft/bop/2014/pdf/BPM6_A3F.pdf
