US Passes EU as Lead Destination for UK Financial Services

Brexit Muddles Future of UK-EU Linkage

The US has overtaken the EU as the leading destination for UK financial services exports, accounting for 34.2% of sector exports in 2020 compared to 30% which went to the EU, according to TheCityUK’s annual report ’Key facts about the UK as an international financial centre’ report.

In 2020, the year following Brexit and the onset of the global Covid-19 pandemic, UK financial and related professional services trade surplus increased to $101.7bn (£79.3bn ) up from $93.8bn (£73.5bn) in 2019, with industry exports generally appearing to be more resilient to issues which impacted the global trade in goods over the same period.

The total value of UK financial services exports remained stable in 2020 at £82.4bn. Financial services exports to the EU were down 6.6% to £24.7bn year-on-year, while exports to non-EU countries rose by 4.1% to £57.7bn in the same period, with exports to the US rising by 5.3%.

When looking at financial services trade surpluses, the UK overwhelmingly remains the clear global leader. The UK financial services trade surplus in 2020 was $80.6bn, almost as much as the next two leading net exporters, the US ($66.9) and Singapore ($24.8), combined. Data which underlines the UK’s competitive position in global financial markets.

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

Hosting one of the world’s leading financial centres provides widespread economic benefits right across the UK. The industry is a national asset. This report demonstrates the resilience and adaptability of the industry in the face of acute challenges and changes brought about by both Brexit and the pandemic.

“This report also illustrates the highly competitive nature of global financial markets, underlining the fact that if the UK does not keep pace, other centres will continue to vie to attract business. The UK’s status as a world leading financial centre is at risk unless industry, government and regulators work together to boost long term competitiveness, deepen key trade links, and focus on new areas of future global growth.”

Other key facts from the report:

  • The UK is a significant global centre for professional services including business management and management consulting (net exports £20.7bn in 2020) and accounting services (net exports totalling £544m in 2020).
  • UK banking sector assets totalled $14.3trn (£10.3trn) at the end of the first half of 2021, the third largest in the world and the largest in Europe, ahead of France ($13.2trn) and Germany ($11.2trn) and Italy($4.8trn)
  • The UK is largest legal services market in Europe (valued at £36.8bn in 2019) and is second only to the US globally. It accounts for a third of Western European legal services fee revenue and around 7% of global legal services fee revenue.
  • The UK maintains a globally leading share across several financial markets. For example, it has 16% of the global total of cross-border bank lending. London is a centre for foreign banks, with around 200 foreign banks or branches in the city.
  • Around 2.5 times as many US dollars are traded in the UK as in the US. Overall, the UK has 43% of the global total of foreign-exchange turnover.
  • The UK insurance sector is the biggest in Europe and fourth largest in the world. UK insurance premiums represented around one-fifth of premiums in advanced European economies and 5.4% of global premiums.
  • The UK private equity market is the most developed in the world outside the US. UK private equity funds invested $37.8bn (equivalent to £29.5bn), the largest amount in Europe, in 2020.
  • The UK FinTech market generated revenue worth £6.6bn and employed 76,500 people as of the first half of 2020.
  • The average amount of capital UK FinTechs received from investors was £20.1m in 2019, up from £15m in 2017. The total investment in FinTech in the UK in 2019 was £3.6bn.
  • London’s importance as a centre for global equity trading is illustrated by the 352 foreign companies listed on the London Stock Exchange (LSE) at as of September 2021, accounting for 15.5% of listings in Europe, Middle East and Africa (EMEA) and 7.6% of global listings. The LSE had a 4.4% share of global equity market capitalisation and 2% of global equity trading by value.

Source: The CityUK

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