For anybody doubting the importance of the financial services sector, recently released government figures highlight just how much impact the sector has on the UK economy. The financial services sector contributed £173.6 billion towards the economy in 2021, this accounted for an astonishing 8.3% of total economic output.
This is a truly astonishing figure, with the sector accounting for nearly 10% of the UK’s total economic output. It shows just how important the financial services sector is to the UK, and why previous governments were so keen to protect it – against a backdrop of public disapproval – during the 2008 financial crisis, largely blamed on the banking system.
It’s important for the UK to keep a good Financial Services Trading relationship with Europe
Depending on which side of the argument you come from, there can be little doubt that leaving Europe has had its issues. This particularly applies to the financial services sector.
According to British government figures, UK exports of financial services have fallen by 19% in the period 2018 to 2021. During the same period, the figures also showed that UK exports of financial services to non-EU states rose by 4%.
For some of that time, the UK was still within the EU, so it’s hard to quantify just how much impact Brexit has had. But one way or another, the figures are down.
Taking the politics out of Brexit is very difficult. That means clear heads from the financial institutions are needed to determine what the true impacts of leaving the EU have had on the financial services industry – positively or negatively.
Remaining part of SEPA is important to UK financial services
Whether inside or outside of the EU, it’s pretty obvious that the UK will benefit from keeping financial transactions moving between London and the continent of Europe as smoothly as possible. The British economy obviously relies heavily on the financial services sector, and as a result, it needs to ensure – as best as it can – that leaving the EU doesn’t affect trade in a negative way.
Remaining a part of SEPA definitely helps the situation, as this system allows countries in and outside of the EU to move money around with the same freedom they can within their own country boundaries.
This covers a whole plethora of financial transactions, and it doesn’t just help businesses, but also employees who work for British companies that operate within the EU.
Examples where being a part of SEPA can improve transactions includes BACS (Bankers’ Automated Clearing System) payments, which is a network of banks and building societies that work together to clear funds quicker – predominately to pay wages.
Another way it improves life is through making it easier to transfer money via simple bank transfers, which is vital on a peer-to-peer level to keep funds flowing around the banking system.
Or it could even be someone looking to sort out their work expenses. An employee who has paid up front may be looking to reimburse expenses. This could be for simple transactions like meals, hotels, or transport. Or the person may need funds wiring to them for expenses in advance of spending if they are in another country.
It is vitally important to keep these financial transactions between Britain and the EU as smooth as possible.
One such area of cooperation that has remained intact is the UK’s continued involvement in the SEPA scheme. SEPA stands for Single Euro Payments Area and is predominantly for EU states. The UK has remained part of SEPA since going its separate way from the European Union, where it is subjected to slightly different rules, in a similar way to other fellow non-EU members such as Iceland, Norway and Switzerland.
The UK’s continued involvement in SEPA is an example of cooperation with Europe and highlights the importance of maintaining links with the European Union. The financial services sector, as much as any industry, knows that maintaining links and good relations with their closest trading partners is essential.
Amsterdam is fast emerging as a major trading rival to London. Countries like the Netherlands can sell themselves across the EU as the place to go where there are fewer trade barriers when it comes to working with their fellow EU nations. This won’t be lost on the UK government, and they will need to ensure that London and the UK as a whole remain one of the biggest attractions in the world when it comes to the financial services industry.