The UK's financial services sector has boomed to its highest level of trade surplus yet, highlighting the importance of maintaining and developing the City's trade ties post-Brexit.
The level of trade surplus in the financial sector jumped $283m (£185m) to reach $97bn (£63.4bn) in 2015, according to a TheCityUK report. The lobby group said the financial sector surplus is now larger than the equivalent surplus in the next four leading economies – the US, Switzerland, Luxembourg and Singapore – combined.
In a recent Treasury select committee grilling, Conservative MP Stephen Hammond cited the industry's unique trade surplus when urging chancellor Philip Hammond to stick up for the Square Mile during crunch Brexit negotiations with fellow EU states.
"Financial services… as you know is 2m jobs in the UK, it's the largest taxpaying sector, it's the largest export sector, and… probably the only sector where we enjoy a large comparative surplus with the EU – and yet financial services as an industry feels that the government is indifferent to its plight," the MP for Wimbledon said.
The questioning, prompted by a front-page City A.M. story, drew reassurance from the chancellor. "[The financial sector] plays a very important role in our external current account balance as you rightly say, providing one of the few bright spots in terms of a positive current balance with the rest of the European Union, and the industry knows that we regard it as extremely important," Philip Hammond said.
TheCityUK's report, published this morning, also found that twice as many US dollars and euros are traded in the UK than in either of their home markets and, at 250, London is a second home to a greater number of overseas banks than anywhere else.
The report noted London had risen to be the global financial sector's hub of choice through a combination of factors such as timezones, language and the rule of law – but it added that other aspects, such as talent availability, regulatory coherence and tax policy, were becoming increasingly more important.
The City think tank also noted the industry could play a key role in reducing the country's overall trade deficit, but hinted this might compromised if the UK failed to strengthen trade ties following Brexit.
"Our largest trading partners are the US and the EU, but our ability to strengthen and deepen trade and investment ties with key developed and emerging markets over the coming years will be absolutely central to enabling us to deliver ongoing economic growth – particularly in the context of Brexit," said Miles Celic, chief executive of TheCityUK.
"The UK's trade and investment strategy is of central importance to its future prospects. Brexit could open up opportunities from new networks of trade and investment agreements."
International Trade secretary Dr Liam Fox added:
As we champion free trade and build new global relationships, we are supporting businesses to seize this unique opportunity to attract investment and expand into new markets. Financial services are already leading the way for other sectors to follow.
The report also renewed calls for the financial services sector to be protected post-Brexit. There have been growing concerns that government is ambivalent about securing passporting rights for the industry, leaving some wondering if and how they can continue operating in the EU.
"It’s important to recognise that [banking] is more internationally mobile than most other sectors," said British Bankers' Association chief executive, Anthony Browne. "That is why we must ensure that banks operating in the UK retain full access to the Single Market so that they can continue to serve customers and clients across Europe after Brexit."
Allie Renison, head of EU and trade policy at the Institute of Directors, said:
The City will continue to be successful whatever the outcome of Brexit, but the government should not be complacent. Constraints on the movement of workers between the UK and the EU and additional compliance burdens could prompt firms to consider moving some operations overseas.