Vision of ‘high wage, high skill’ economy powered by financial and related professional services

Financial services productivity was nearly twice as high as productivity in the UK economy as a whole in 2019; output per worker at £114,793 vs £58,261 respectively, according to a new report from TheCityUK. This gives the industry a key role to play in realising the Prime Minister’s ambition of a “high-skill, high-wage” economy.

TheCityUK’s latest report, ‘Enabling growth across the UK 2021’, found that this differential in output per worker was present in all parts of the UK, and is especially striking in Scotland (£112,585 vs £55,75)1 and London (£162,360 vs £81,408), the West Midlands (£89,680 vs £50,774), and the North West (£88,011 vs £51,559).

The report also examines the total contribution the industry and its composite sectors make to the UK’s nations, regions, towns, and cities. It shows of the 2.3 million people in industry employment – 1 in 14 British jobs – two thirds of these are based outside London. This is roughly equivalent to the entire populations of Birmingham, Glasgow and Edinburgh combined.

Financial and related professional services contributed £193.8bn to the UK economy in 2019, representing 9.8% of total GVA for the UK as a whole, with similar contributions to local town and city economies across the country.

The ‘Enabling growth across the UK’ report, also found that there are several key clusters of financial and related professional services activities across the UK:

• Major UK centres with more than 30,000 people in employment within the financial and related professional services industry include Birmingham, Bristol, Edinburgh, Glasgow, Leeds and Manchester. Overall, 21 towns and cities in the UK each have more than 10,000 people in employment in the industry.
• The West Midlands has a significant concentration of activity in banking and management consulting. This was still strengthened by the establishment of HSBC UK headquarters in Birmingham, as well as the recent opening of a new office in the city by Goldman Sachs
• Scotland is rapidly becoming a global leader in FinTech and is well positioned to capitalise on its data-driven innovation with the support of FinTech Scotland
• The East of England is a hub for the insurance and accountancy sectors, and Norwich is one of the largest general insurance markets outside London. Cambridge is also home to a large concentration of venture capital investors’ headquarters
• The North West is a particular centre for asset and wealth management and management consulting, and is also the second largest legal centre in the UK after London

Andy Street, Mayor of the West Midlands, who will attend the report’s launch, said,

TheCityUK makes a number of recommendations to help deliver on the promise of levelling-up including:

• Hardwire the concept of levelling up and regional development into the UK’s policymaking machinery, including setting metrics focused on economic opportunities and environmental impact, and including key performance indicators specific to levelling-up for key governmental departments.
• Digital infrastructure should be prioritised to connect and transform regions and nations.
• The government must ensure that its investment in skills is aligned with the needs of businesses and accessible across the UK, reflecting that two thirds of the 2.3 million people employed in financial and related professional services are based outside London.
• There needs to be a partnership between government and industry to achieving the shared goal of transitioning the UK to a Net-Zero economy across each of the nations and regions.
• Government should accelerate the progress it has already made in ensuring that relevant regulators and central departments establish operations in major financial and related professional services hubs outside London.
• Government should dedicate resources – including expertise, marketing collateral and logistical support – to representing major regional clusters, with a view to expanding global networks and client bases across emerging global centres.
• Devolving power to a clearly and tightly defined ‘place’, be that a city region, sub-region or a major new town, can ensure decision-making takes place at close proximity and in continued dialogue with the local industry cluster. Further devolution to these defined places should proceed at pace.