Sustainable and well regulated growth in the UK financial services sector could generate approximately 22,000 additional jobs in the UK insurance industry by 2020, according to a new PwC report, “Where next? Assessing the current and future contribution of the UK Financial Services sector”, launched on Monday. Approximately 47,500 additional jobs could be created across the whole UK financial services sector, with up to 218,000 across the wider UK economy.
PwC economists based their analysis on two scenarios designed to represent potential futures for the financial services sector and the wider economy:
-Scenario 1: is a vision for the future with a growing financial services sector. This is supported by a robust, but supportive, regulatory regime and economic and market conditions that are also beneficial to the financial services sector. The sector grows at a substantial, but more sustainable rate before the 2007 crises.
-Scenario 2: provides an alternative view of the financial services sector which is constrained by weaker economic and market conditions both domestically and globally, as well as a regulatory environment that does less to facilitate growth than that specified in scenario 1.
Jonathan Howe, UK insurance leader at PwC, comments “Our analysis shows the important contribution the UK insurance sector makes to not only the financial services sector, but to the whole of the UK economy. A thriving insurance sector is essential to both the UK economy and to individuals, yet it is important that this is supported with a sustainable and stable regulatory regime.
The financial crisis brought to light many unsustainable practices in banks and providers of financial services that has highlighted the need for better regulation. The challenge for insurance policymakers is the provision of effective UK and EU regulation that limits the likelihood and impact of any future crises, while allowing both the insurance sector and the wider economy to prosper.
Additional report findings are:
-The financial services sector is a critical business input: Business bought more than £113bn of financial services in 2010.
-The financial services sector purchases significant amounts of goods and services from other parts of the economy: In 2010, the sector bought more than £90bn worth of inputs from other parts of the economy. The biggest areas of demand from financial services are telecoms, IT, transport and catering.
-The financial services sector generates a substantial amount of activity within itself such as investment banking and brokering: 2010 data suggests this figure is in excess of £20bn.
Nick Forrest, director and financial services economist at PwC, comments “The financial services sector has a critical role in the UK economy. In addition to providing credit, it creates demand in other sectors and helps improve the flow capital around the economy. A well-functioning financial services sector improves both capital efficiency and overall UK productivity.
Business confidence depends upon trust in a well functioning financial services sector. 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.”
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