By any standards, 2020 was an unprecedented year for businesses and households alike. The uncertainty around our future relationship with the EU and the long shadow cast by the COVID-19 pandemic posed challenges not seen since the second world war. Even with the vaccine rollout well underway, the road to recovery remains uncertain with significant issues to tackle in the year ahead.
Despite this, British businesses and workers have shown remarkable agility and resilience. The financial services sector for example, thanks in part to heavy investment in technology in recent years, was able to switch to whole-scale remote working almost overnight.
A new report published by the City of London Corporation last week shows that this resilience meant financial services contributed a record £75.6bn in tax in the year to March 2020, which amounted to over 10 per cent of overall government tax receipts.
Significantly, employment taxes made up almost half of the sector’s tax contribution, highlighting the value of financial services across the country.
The sector employs over one million people right across the UK, accounting for around 3% of the UK workforce. Two thirds of those jobs are outside of London, so it has a vital role to play in driving the country’s economic recovery.
While these figures predate the pandemic, the sector’s total tax contribution is expected to remain robust according to the projections made in the report.
It estimates that in the current financial year ending in March 2021, the sector will pay between £71.1bn and £75.7bn in taxes, despite the continuing impact of lockdown and other restrictions.
This shows that while the trajectory of the pandemic is still uncertain, the financial services sector’s contribution will continue to provide a much-needed element of stability.
This resilience meant that the UK financial services firms were able to support other businesses and the wider economy in the pandemic by administering large numbers of government loans and granting nearly two million mortgage payment deferrals to households, equivalent to one in six mortgages in the UK.
However, we live in an ever-changing landscape of technological advances and practices. Innovation and automation are the twin pillars on which the future will be built. For the UK to remain competitive, it is crucial that the financial sector focuses on accelerating the change to digitalisation and developing new products that meet the changing needs of customers.
This will require an ambitious vision for the sector and support from the Government to focus on the future of the City, helping green finance, fintech, and other fast-growing areas. Only in this way will the sector be able to retain its position on the world stage, safeguard jobs, and continue to make such a significant contribution to the nation’s economy.
The financial services sector is vital to supporting prosperity right across the UK and will play a critical role in fuelling our economic success. It remains committed to driving our recovery forward in the months and years ahead.