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PwC: Financial services can create growth

25/07/13

UK accountancy firm PricewaterhouseCoopers (PwC) has released a report suggesting that a well-regulated and sensibly ran financial services sector in the UK could generate major economic and employment growth for the country over the next seven years.

While this might sound a little like turkeys voting for a vegetarian Christmas, there's no getting around the fact that the company's figures are convincing.

PwC suggested sustainable growth in the financial services industry could create some 218,000 jobs for the UK's wider economy, including 22,000 in the insurance sector, while 47,500 roles would be generated in the industry itself.

Economists based their analysis on two scenarios designed to represent potential futures for British financial services - one in which a robust but supportive regulatory regime helps the sector grow at a reasonable rate, and another where weaker economic and market conditions plus unhelpful rulings stifle expansion.

This seems fairly comprehensive, apart from the fact that it doesn't take in the possibility of a global zombie apocalypse, with PwC warning that the latter scenario would be bad for the wider economy as well as for the financial services industry specifically.

Nick Forrest, director and financial services economist at PwC, said a well-functioning banking and insurance sector is absolutely vital to many other businesses across the UK, meaning any regulation should be well-considered and avoid draconian measures.

"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."

Companies bought more than £113 billion of financial services in 2010, making them a huge business input, while activities such as investment banking and brokering also generated in excess of £20 billion over the course of the year.

If PwC get their wish for inherently supportive regulation (and they almost certainly will), the financial services industry could be set to create jobs in London and further afield in the near future.

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