Paid professional service companies Â£ 15.5 billion in taxes last year. However, while that figure is already substantial, a new report claims the combined efforts of regulators, government and industry could enable the sector to deliver an additional Â£ 16bn to the UK economy by 2025.
The UK is the world’s leading international financial center. However, a context of rapid global change poses significant challenges that must be addressed if it is to maintain its competitive advantage and remain a leading part of the economy. The UK professional financial services industry, which includes accountants, lawyers and consultants, among others, is particularly at a major crossroads. Currently, the sector employs 693,000 people in a variety of roles, making the UK market the largest of its kind in Europe. On top of that, the combined sector accounts for 2.2% of the UK workforce, in turn paying 2.5% of all income taxes collected, the equivalent of the entire annual budget of UK police, who are currently subject to a public sector pay freeze. This suggests that if this tax source were affected by puzzles such as Brexit, public finances would be further destabilized from their currently weakened state.
23.3% of all financial advisers in the EU currently reside in the UK. Germany is the second largest center with 21% of EU employees, and France comes third with 10%. If such a massive migration of financial institutions occurs, that is set to change, as the UK’s broader financial services ecosystem – including accounting and legal firms – is threatened as a result. According to a new study from TheCityUK, PwC, the world’s largest accounting and consulting firm, and Strategy &, Britain is currently home to 60,470 such entities, including the Magic Circle law firms and the Big Four. accounting firms, with PwC themselves, alongside Deloitte, KPMG and EY. – in addition to small businesses.
The report also showed how accounting, legal and consulting firms paid 37% of UK income taxes in 2016, directly generating Â£ 6.4bn, as well as Â£ 9.1bn in related taxes. . However, earlier in the year projections emerged that as many as 40,000 investment bankers could be part of a mass ‘Brexodus’, in order to maintain access to free trade by setting up shop. on the continent. If they felt the impact of Brexit, the ramifications for the economy at large would be colossal. The report by PwC and TheCityUK, âA vision for atransformed, world-leader industryâ aims to provide a practical roadmap for securing the future of industry in the UK , however Brexit unfolds. The researchers believe that implementing the vision will ensure a transformed and renewed industry that will deliver world-class, highly innovative and digitized services, while being better able to meet changing customer needs.
A strategic partnership between government, industry and regulators will be necessary to adequately execute the plan according to its authors. In order to offer products and services that meet key societal needs, for example, governments will need to invest in training a skilled workforce, in order to provide the industry with a talent pool to compensate for its loss. loss of access to the free movement of labor in the EU. Strong and agile internationally focused regulation and a simplified, stable and internationally competitive tax regime will meanwhile be necessary to maintain the attractiveness of the UK in a post-EU environment.
In the city
These aspects of the UK market would lead to increased competitiveness, innovation and export efficiency, with the report claiming this could lead to an additional Â£ 16bn, or 9%, of gross value added (GVA ) of the industry in 2025, compared to the current scenario. Moreover, the UK economy as a whole could see an additional Â£ 43bn, or 2% of GDP by the end of the same period.
Interestingly, as the nation’s capital sees its position as a European financial hub under threat, most of that growth would come from outside London. 70% of this additional production would likely come from towns beyond the city limits. The fastest growing regions for the industry by 2025 would be the North East (30%), Northern Ireland (25%), the West Midlands (23%), Yorkshire and the Humber ( 23%) and the East Midlands (19%).
Miles Celic, Managing Director of TheCityUK, said: âThis expertise is not just located in London. Across the UK, centers of excellence including Manchester, Bristol and Edinburgh are adding value to the UK economy. Celic added: “These are also the areas where we expect to see the most significant growth in the years to come as we move forward with Brexit and beyond.”