Playing to the strengths of our cluster advantage

Chris Cummings, CEO, TheCityUK

Last quarter's growth figures were disapointing and point to a slow and bumpy recovery rather than a pleasant glide path back to prosperity.

With the Government looking to save £80bn in the life of this Parliament it is useful to consider the role of the financial services sector, which benefited the Treasury by £50bn in the last year alone.

The sector is a national employer. Over 1m people are employed in financial services, with two-thirds based outside of London. This is a sector of scale. Few other industries employ one in twenty of the working population.

Too often financial services jobs get discussed as being about 'bankers in the City'. The truth is that the sector employs people right across the country. These are people doing valuable work helping people to save for the future, protect their families, and grow their businesses. Every day the industry pays out £173m in pension benefits - that's more than the Government.

The UK benefits from something called 'the cluster'. Over decades, with London as the shop window, the UK has been the place to come and do business. Like the 'tech cluster' in Silicon Valley, a unique gathering of innovative international firms have grown up here. From accountants to solicitors, from actuaries to underwriters, from brokers to reinsurance firms, from financial PR specialists to corporate advisers, London and the whole of the UK has developed a set of skills that is unrivalled. It is often said that it takes 18 different types of firms to enable an organisation to list its shares on the stock exchange – all of these firms and skill sets can be found in abundance across the UK.

It is for this reason that international financial services firms make their homes here. So against this backdrop, should we continue to punish today's financial services sector for the poor lending decisions that contributed to the recession? Public sentiment suggests this topic remains current and that some in society would be happy to see these international firms leave. Oddly, some commentators fail to mention that many of the international firms they pillory didn't actually cost the taxpayer a penny. Indeed, these firms are only based in the UK because it makes business sense to them and the UK has benefited from their decisions: J.P. Morgan is the biggest employer in Dorset, Deutsche Bank employs thousands in Birmingham, Citi is a major employer in Belfast, and the list goes on.

If these jobs were judged a necessary cost to rebalance the economy and the international firms were lost, what would be the cost? A major part of the cluster would be removed and the 'gravity' that holds it together would be weakened.

It's worth noting that apart from the 1m jobs in financial services, the professional services community also makes up another million people. Our advisory and business services sector is so strong because of the rich legacy we've enjoyed – created for the UK by far sighted entrepreneurs and built up over 100 years. We risk losing that heritage within a decade, not by deliberate action but by neglect and misjudgement.

At a time when others are being so welcoming to our financial services and related professional services sector, we should pause and ask why. Why is it that they want the jobs, tax and social contribution that we seem so keen to expel? It would be foolhardy indeed to turn away the very sector that can help the UK recover just at a time when others are trying to capture it. This is a competitive world and we must not lose our competitive advantages – let alone drive them away.

Find out more about TheCityUK at www.thecityuk.com