The UK’s financial system, like those in other countries, intermediates national savings and investments, invests domestic savings abroad, and brings foreign investment inward. But what it does better than all others is take savings from one part of the globe and move them to investments in another. If a German company builds a new factory using US savings, there is a good chance that deal was arranged in London.
In the chart below, this global business is done by ‘Major UK and international banks’ and ‘Branches of foreign banks’. Their total assets give an indication of just how important this global business is to the UK financial system, and shows how crucial it will be for the UK to build new economic relations after it leaves the European Union, when these banks will have moved some operations to the continent.
As the great City journalist Christopher Fildes wrote, ‘It [the City] depends for its success on its critical mass, and if that ever started to unravel, nothing could save it. Recovery and reinvention have done wonders for the City, but its greatest mistake would be to take its own success for granted. Its denizens should know by now that markets do not move in one direction for ever. Life is like that, and finance, after all, is human nature in action.’
Sources: ONS, Bank of England, annual reports, Unquote, Prequin, Morningstar, Mapping the UK financial system (Bank of England, 2015), OMFIF analysis
Note: Major UK international banks are Barclays, HSBC, RBS & Standard Chartered. Major UK domestic banks are Co-operative Bank, Lloyds Banking Group, Nationwide and Santander UK. All data is end-2018 except for insurance companies, unit trusts, investment trusts and pension funds, which are end-2017. Private equity assets are an estimate derived from fundraising activity.