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The Curse of the UK Financial Sector?

Discussion in 'off topic' started by droodzilla, Mar 12, 2019.

  1. Gaycha

    Gaycha Well-Known Member

    It is the work of academia, but if you read the SPERI mission statement, they were set up in 2012 to bring academic research closer into political commentary and in their words 'burst some of the Westminster bubbles of analysis and economic data interpretation.

    What they produce is therefore (to me) at least as valid as most of the otherWestminster pundit views and lobbyists, in forming a view. They are quoted by BBC, FT etc, for what that is worth. Quoted by PFM too now, so undoubted heavyweights ;)

    That the SPERI seniors contribute to and have declared many ties with the New Statesman, is an indicator of their overall political stance, and should be taken into account when reading their reports.

    Not to be dismissed though. :)
  2. russel

    russel ./_dazed_and_confused

    The UK tax code apparently runs to over thirteen thousand pages in Hong Kong it's less than three hundred and yes accountants do a lot of management jobs and are over represented in such jobs, the UK has one of the lowest R&D spends in the developed world and the lowest levels of automation, obviously someone with a knowledge of finance is needed on boards but it's so unbalanced there is not an appreciation of long term investment, if you have accountants paid by the hour, an easy way to justify their fees is to slash investment and R&D.
    Snufkin likes this.
  3. wacko

    wacko pfm Member

    I agree with much of that: the tax code should certainly be greatly reduced. HK does not rely on tax much: intelligent land sales fund the Government. I don't think short-termism can be blamed on accountants: it is the quoted company quarterly reporting cycle that is too short but then you increase it and some shysters take advantage of that... Auditors are paid by the hour: there is a case their fees are too low to do a proper job, and they make it up on consultancy.
    There is no point destroying something the UK is actually good at hoping something will take its place: grow that other sector methodically with correct policies/incentives. Yes I know that's boring.
  4. Jim Audiomisc

    Jim Audiomisc pfm Member

    Erm... it would rather depend on the definition you're choosing for "overmanning", and what you either leave out of your sight or cover over using that term.

    "Accountants" have their fingers in many pies at many levels these days. From providing "free advisors" to MPs, though all kinds of "advising", "consultancy", etc, etc. Not just totting up the books for SMEs. I guess you may not read PE. But for years they have documented case after case and trick after trick that the 'big' accountancy firms have been perpetrating to the *disadvantage* of UK business *and* politics. The whole setup badly needs better oversight, regulation, and the breakup of the larger accountancy firms. It also need the law changed to ban the same firm both checking the balance sheets and providing "other services". Hard to estimate just how much damage they have done to the UK over recent decades.

    Curious, innit, how huge firms get their books signed off as OK, only to collapse shortly afterward... and all those involved adopt "who knew?!" as their cover. Ditto for all kinds of PFIs, outsourcings, and other 'hide the facts' schemes that shuffle the money out of sight into a few pockets - usually outwith the UK! All the time 'guiding' some of our MPs generously without being paid.
  5. russel

    russel ./_dazed_and_confused

    The case that it must be kept because it's good at what it does, is not really valid, a criminal gang may be good at making profits but it's not really a benefit to society as a whole. It's difficult to see how the system can be changed when it serves one particular group very well indeed.
  6. wacko

    wacko pfm Member

    ^^ a quick google reveals Financial Services (FS) contributed £119 billion (6.5%) to the UK economy in 2017. There are over 1 million DIRECT FS jobs. £27.3 billion in tax so larger than all manufacturing put together. This is not a few crims in the East End.
    And the size of the UK FS industry cannot be related to the size of the UK economy any more than the size of the German car industry to the German car market. Both are global players.
    Gaycha and darrenyeats like this.
  7. Jim Audiomisc

    Jim Audiomisc pfm Member

    Politicians love figures for things like 'GDP' and 'contribution to the economy'. They let the politicians gloss over the way much of the 'figures' consist of value being shifted from one pile to another, or 'values' changing in terms of assessements (i.e. guesswork).
  8. darrenyeats

    darrenyeats pfm Member

    As wacko wrote, my understanding is that we export more financial services overseas than we import. We can't say the same for most other UK business sectors.

    This might be like sacking the egotistical, highly-paid and annoying goal-scorer from our team, when in fact this might be against our interests. Be careful what you wish for.

    A rebalancing is good. But shrinking the finance sector with post-Brexit cross-border tariffs isn't for us an advantageous way to do it.
    Last edited: Mar 14, 2019
  9. wacko

    wacko pfm Member

    What does that mean ? Financial Services contributes about the same as the NHS costs. Throw both away if you want to.
  10. Gaycha

    Gaycha Well-Known Member

    Can't ratify the accuracy, but this seems about right.

    FSI is net exporter. Domestic market secondary in magnitude. 44% within EU is probably important...


    A new report by TheCityUK shows that the UK remains the world’s leading net exporter of financial services, generating an industry trade surplus of £68bn in 2017, nearly equal to the next three leading net exporting countries combined (the US, Switzerland, and Luxembourg).
    When related professional services, such as legal, accounting and business advice, are added, the UK’s combined financial and related professional services trade surplus was around £83bn ($107bn).

    The annual 'Key facts about the UK as an international financial centre 2018’ report reveals about 44% of this trade surplus was generated by trade with the EU, 19% by the US, and 3% by Japan and Switzerland respectively, with the remainder generated by other countries.

    TheCityUK report also sets out the facts and figures which underline the value of the UK’s leading net exporting industry.

    Anjalika Bardalai, Chief Economist and Head of Research, TheCityUK, said,

    The UK is not only a leading global financial centre, it is also Europe’s financial hub. While this will remain the case after the UK exits the EU next year, Brexit has reinforced the UK’s need to strengthen its trade and investment relationships with key nations beyond the EU, such as the US, Japan, Switzerland, China and India.

    “The UK currently has a clear competitive advantage in financial and related professional services and it is vital that this position is not inadvertently eroded. The government must be proactive in reinforcing the global attractiveness of the UK as a place to invest and do business.”

    Key facts in the report:

    • The UK is the world’s leading venue for foreign exchange trading, with 37% of global market share
    • More than twice as many euros are traded in the UK as in the Eurozone, and nearly twice as many US dollars are traded in the UK as in the US
    • The UK is the world leader in cross-border bank lending, with 18% of global market share
    • The UK is the world leader in international debt securities, with 13% global market share
    • The UK is also in the top three jurisdictions for Interest rate OTC derivatives trading, conventional fund management and also insurance
    • UK banking sector assets are the largest in Europe: UK £8trn ($10.8trn), France £7.5trn ($10.1trn), Germany £6.8trn ($9.2trn), Italy £3.3trn ($4.5trn)
    • The UK’s legal services sector is the largest in Europe and 2nd largest globally. The UK accounts for 6.5% of global legal services fee revenue £659 ($849bn)
    • UK accounting services net exports were $2.5bn ($3.2bn) in 2017
    • The UK insurance sector is the biggest in Europe and the 4th biggest in the world
    • At £2.5trn ($3.2trn), the value of international bonds in the UK is the largest in the world
    • UK assets under management are a record £9.1trn ($11.8trn)
    • The average daily volume of gold cleared at the London Bullion Market Association was 20.7m million ounces in 2017, worth a total of £20.2bn ($26bn) per day
    PhilofCas likes this.
  11. Gaycha

    Gaycha Well-Known Member

    darrenyeats likes this.
  12. Gaycha

    Gaycha Well-Known Member

  13. russel

    russel ./_dazed_and_confused

    There are a few issues, one is we do not know how much it would contribute if there was a proper clampdown on money laundering and tax avoidance, also the city of London has through various acts got a high level of access and influence that other business groups do not have, If those issues were sorted out I wouldn't have a problem with it.
    Sue Pertwee-Tyr likes this.
  14. wacko

    wacko pfm Member

    ^^ and VW and others lied about diesel emissions. I don't remember a move in Germany to exit car manufacturing. Of course FS has high level access and influence that makers of left handed widgets don't.
  15. Jim Audiomisc

    Jim Audiomisc pfm Member

    That risks using the term "export" in a way that may not have the same real-world meaning in the two - quite different - cases. cf comments elsewhere about this blurred use of language.
  16. Jim Audiomisc

    Jim Audiomisc pfm Member

    It means that the use of the term "contributes" may not have the same actual meaning in reality in both cases. Example of how politicians, etc, play games with language to cover over the reality.
  17. Jim Audiomisc

    Jim Audiomisc pfm Member

    Yes, they like to trot out blurbs like that. :)

    But you may need to look elsewhere to find the realiity as they do their best to hide it under the blarney.

    How much of that "surplus" is actually owned by companies/people *outside the UK*, or *kept outside the UK*. Then '*invested in companies/projects outwith the UK, etc'?

    In effect they like to quote what might be described as 'thoughput of balance' values, little of which comes to ground as wealth in the pockets of people in the UK. It can also be boosted by factors like house/land prices rising, and that being factored via the banks, etc.

    So you do have to look at the reality under them rather than rely on the use of terms like 'surplus' etc if you want to know the *real* benefit/disadvantage caused to the UK. You also would need to determine the 'opportunity cost' to us of having a dominating 'financial services' sector that hikes sterling and land/property prices and hampers other sectors from growing here.

    So the report you quote is impressive PR, but it isn't a reliable way to tell if 'The City' really is our best bet for an improved economy all around.
    Sue Pertwee-Tyr, Snufkin and Gaycha like this.
  18. Gaycha

    Gaycha Well-Known Member

    I guess the pragmatic approach is "it's Big, so lets not thwart or kill it just yet"

    - until we know that's there is an immediate viable alternative to take up the slack.....cue roaring silence from the politicians, economists and budding industrialists out there.
  19. dweezil

    dweezil pfm Member

    Seems a bit pointless to kill an industry providing valued services to the rest of the world and a large income to the Exchequer.

    I know it's a bit of an English tradition to hate anyone richer than ourselves but there's a lot of us on smaller incomes derived from FS ticking along
    and supporting a few families or nurses while we take risks each day.
    Gaycha likes this.
  20. h.g.

    h.g. pfm Member

    The financial services industry doesn't generate wealth it tends to redistribute wealth created by other sectors of the economy. If the financial services industry was smaller that wealth would simply remain in the other sectors of the economy rather than disappearing. The financial sector undoubtedly provided a better service to both UK industry and it's people when it was over a magnitude smaller than it is today by lending more to industry, not driving up house prices, not shifting vast amounts of money out of the country to avoid taxation, etc...

    If you wish to support the interests of the 99% in the UK the case do something pretty serious with the financial industry is overwhelming. Of course, the opposite tends to be true for the interests of the 1% and that is a problem.

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