PwC analysis: A well-functioning financial services sector could create over a quarter of a million more UK jobs by 2020

Published at 00:01 AM on 22 July 2013

Download Where Next_Full Report
  • Approximately 218,000 more jobs could be created in the wider economy across the UK and approximately 47,000 additional jobs in the financial services sector by 2020
  • GDP could be 2-3% higher by 2020 if financial services Gross Value Added (GVA - contribution to wider economy) rises by £50bn between 2013/14 and 2020/21
  • With weaker financial services growth and if its GVA contribution rises by £9bn, UK GDP could only rise by 0.2% and create 12,000 additional jobs by 2020/21.

Sustainable and well regulated growth in the UK financial services sector could generate approximately 265,000 additional jobs and GDP growth of 2-3% in the UK by 2020, according to a new PwC report, “Where next? Assessing the current and future contribution of the UK Financial Services sector”, launched today.  PwC analysis also revealed that a weaker contribution of the UK financial services industry to the wider economy could result in a much smaller GDP rise of 0.2% and only an additional 12,000 jobs across industries, including and outside of, financial services.

PwC economists based their analysis on two scenarios designed to represent potential futures for the financial services sector and the wider economy:

Scenario 1: combines a robust regulatory regime that facilitates FS sector growth with economic conditions that are also beneficial to the FS sector. The FS sector grows at a substantial, but more sustainable rate than it did before the 2007 crises.

Scenario 2: provides an alternative view of the FS sector which is constrained by weaker economic conditions both domestically and globally, as well as a regulatory environment that does less to facilitate growth than that specified in Scenario1.

 

Impact of Scenario 1 on industry job creation in the UK between 2013 and 2020:

 

2013

2015

2020

Mining and agriculture

0.0

0.0

0.0

Manufacturing

5.7

7.2

45.9

Utilities

0.8

1.1

2.8

Construction

2.3

2.8

17.4

Retail

17.1

21.6

41.6

Transport

3.6

5.0

34.0

Services

35.9

46.1

67.4

Hotels and accommodation

2.3

2.9

4.9

Financial services

2.3

2.7

16.5

Insurance

3.0

3.6

22.3

Auxiliary financial services

1.2

1.4

8.7

Restaurants and Leisure

0.6

0.7

4.0

Total

74.7

95.1

265.5

FS Total

6.4

7.7

47.5

Source: PwC analysis (numbers in thousands)

* Financial services + Insurance + Auxiliary financial services = Financial services sector total

 

Impact of Scenario 1 on regional job creation in the UK between 2013 and 2020:

 

2013

2015

2020

North East

1.3

1.7

4.8

North West

5.5

6.9

19.4

Yorkshire and The Humber

4.2

5.4

15.1

East Midlands

2.2

2.8

7.9

West Midlands

3.9

5.0

14.0

East of England

4.3

5.5

15.4

London

37.3

47.6

132.8

South East

6.8

8.6

24.0

South West

4.7

6.0

16.8

Wales

1.5

1.9

5.2

Scotland

2.1

2.6

7.3

Northern Ireland

0.8

1.1

2.9

Total jobs created

74.7

95.1

265.5

 Source: PwC analysis (numbers in thousands)

 

Kevin Burrowes, UK financial services leader at PwC, commented:

“The financial services sector has contributed both positively and negatively to the UK’s economic growth of the past decade.  While the sector has contributed significantly to investment and job creation throughout the country, the financial crisis brought to light many unsustainable practices in banks and providers of financial services that has highlighted the need for better regulation.  The challenge for policymakers is the provision of effective UK and EU regulation that limits the likelihood and impact of any future crises, while allowing both the financial services sector and the wider economy to prosper.

“Our analysis suggests that the links between the financial services sector and other sectors across the UK economy are strong.  This shows the important contribution the sector makes to the UK economy across all regions, but also highlights the profound effect that financial services regulation or changes in financial services performance can have on non-financial services business.”

Additional report findings:

  • The financial services sector is a critical business input: Business bought more than £113bn of financial services in 2010 (most recent official data available). 
  • The financial services sector purchases significant amounts of goods and services from other parts of the economy: In 2010, the sector bought more than £90bn worth of inputs from other parts of the economy. The biggest areas of demand from financial services are telecoms, IT, transport and catering.  
  • The financial services sector generates a substantial amount of activity within itself such as investment banking and brokering: 2010 data suggests this figure is in excess of £20bn. 

Nick Forrest, director and financial services economist at PwC, commented:

 “The financial services sector has a critical role in the UK economy. In addition to providing credit, it creates demand in other sectors and helps improve the flow capital around the economy. A well-functioning financial services sector improves both capital efficiency and overall UK productivity.

 “Business confidence depends upon trust in a well functioning financial services sector.  The greater confidence that businesses have that their future profitability will increase, the more likely it is that they will invest, leading to an increases in the different components of GDP such as consumption and exports.”

 

Kevin Burrowes, UK financial services leader at PwC, concluded:

 “A thriving financial services sector is essential to the UK economy.  It is important that financial services reforms are balanced against the performance of the sector, and its contribution to the overall UK economy.

 “Many aspects of financial services reform are currently constraining the advice and products financial services institutions can offer to customers, making competition improvement in the sector difficult to achieve.

 “While limiting the likelihood and impact of future crises must be a top priority, better regulation does not necessarily mean more regulation. The UK needs some re-balancing of financial services regulation to unlock the industry’s potential in a sustainable and stable way to achieve the contribution that financial services can clearly give to the economy.”

 

ENDS

 

Notes to editor:

 

  • The model used in this report is known formally as a Computable General Equilibrium model (CGE). It is a dynamic multi-sector model of the UK economy that has been built specifically to conduct scenario analysis. The model estimates how an economy might react to changes in policy, technology or other external factors. Our approach is consistent with similar methodologies used by the IMF, World Bank, OECD and the European Commission (as well as major governments).  The model looks at the interactions between different industrial sectors, households and the Government.
Media Contact:
Katherine Howbrook
PwC | PR Manager, Financial Services
Direct: +44 (0) 20 7212 2711 | Mobile: +44 (0) 7515 119 096
Email: [email protected]
PricewaterhouseCoopers LLP
1 Embankment Place, London, WC2N 6RH

Twitter
LinkedIn
Facebook
Google+

About PwC

At PwC, our purpose is to build trust in society and solve important problems. We’re a network of firms in 157 countries with more than 208,000 people who are committed to delivering quality in assurance, advisory and tax services. Find out more and tell us what matters to you by visiting us at www.pwc.com.

PwC refers to the PwC network and/or one or more of its member firms, each of which is a separate legal entity. Please see www.pwc.com/structure for further details. © 2016 PwC. All rights reserved

« PwC: OECD project could mark biggest reform of global taxation in lifetime | Homepage | PwC comments on Competition Commission's Provisional Decision on Remedies summary »

  • Contact us
  • +44 (0) 20 7213 1768

Specific and out of hours contacts