The UK is the world's leading financial services centre and the most internationally focused marketplace in the world: it is a global leader in cross-border bank lending, foreign exchange operations, interest rates OTC derivatives, maritime insurance and the leading western centre for Islamic finance.
The UK’s global reach relies on a strong presence in Europe. For the sector as a whole, Europe is the largest single destination for exports. The UK’s insurance industry is the largest in Europe, and the UK accounts for 85% of European-based hedge funds’ assets.
The sector is a valuable asset for Britain. Financial services provide around 8% of the country’s total GVA. It has the highest tax burden as a percentage of GVA of all sectors (37%), contributing around 7% of government tax receipts.
The financial services industry plays a critical role in supporting British business operations by providing capital for investments. The UK’s financial services industry also supports a much wider nexus of business and professional services such as accountancy, auditing and legal services. While financial services contributed 8% of UK GVA in 2012, business and professional services contributed a further 6%. 
The sector is still recovering from the impact of the financial crisis which, in addition to hitting the sector economically, made it a focal point of public and political mistrust.
A series of regulatory reforms is sweeping through the sector. Following the crisis, new rules aimed at strengthening supervision of the sector and improving stability are suppressing returns as actors must hold more capital, more liquid assets and more collateral.
A global regulatory consensus with two major regimes– the EU and the US – has emerged after the crisis, influencing the rules for financial services across jurisdictions and reducing the room for manoeuvre for smaller regimes. There are, however, recent signs of concerning divergence between these regimes.
International companies must navigate between reforms taking place at different levels of governance – globally, at regional level, and domestically.
Significant opportunities for growth lie in shifting global pools of savings and wealth. A large and growing middle class will fuel life and health insurance growth in Asia. Although mature markets remain predominant, emerging markets will contribute about 50% of growth through 2014. 
The rise of new channels to reach customers is changing the market. The increases of direct sales, such as online and by phone, have been spectacular, with direct motor insurance accounting for 40% of the total market in the UK.
A key driver of growth for the UK’s financial sector has been the Single Market, which has brought FDI into the sector as European and global actors move their operations to London and regional hubs across the country. The UK’s financial services trade surplus with the EU has doubled in the past decade. This has substantially improved access to well-developed liquid capital markets for UK companies, assisting domestic investment and export ambitions.
A substantial advantage for UK financial services firms is that EU rules have opened up European markets, particularly for securities and banking. For example, rules offering firms the ability to use a single ‘passport’ across all member states to deliver services has allowed companies authorised in the UK to conduct business across the EEA (the 28 EU plus the three EEA EFTA states).
Integration has helped consumers and businesses through a reduction in cost of cross-border payments (average charge for a payment of €100 fell from €24 to €2.50 between 1999 and2004).
The sector is also reliant on the access to EU labour markets. In over 45% of UK positive investment cases, decision-makers cited access to skilled staff – including EU nationals – as one of the core reasons for choosing the UK. 
New EU regulations will increase costs for financial services companies. However, reform post-crisis has been pushed at all levels, with a substantial part of EU rules implemented due to G20 commitments to ensure financial stability. A number of reforms have been pushed by the UK itself, such as the Retail Distribution Review and Banking Reform Bill on structural reform. Regulation at EU level nevertheless remains a key risk for financial services companies. That said, there are a number of examples of positive EU regulation, such as the Recovery and Resolution Directive.
London is the world's leading financial centre
Maintaining access to the EU Single Market is essential for financial services firms to continue to prosper and for the UK to remain an attractive location for foreign companies to base their European operations.
Completing the Single Market, in particular improving the digital policies to allow further penetration of online services to continental Europe, could add 1.1% to Europe’s GDP for the financial services sector. The sector needs to maintain access to EU labour markets to allow UK-based companies to gain access to the best talent. This should be supported by an emphasis on UK’s skills level through studies on financial literacy and STEM subjects supported and encouraged by the sector.
Securing access to third country markets through the EU’s negotiating weight will drive improvements in local regulation in emerging markets on foreign ownership – particularly for insurance companies. The sector would also like to see improvements of current double tax arrangements.
The regulatory agenda at global, EU and national level must link the need for good regulation and supervision with enabling the financial services sector to play its role supporting businesses and consumers.
 ONS, 2010
 ONS Pink Book 2012; ONS
 TheCityUK, ‘Key Facts about UK Financial and Professional Services’, 2013
 Haver Analytics UK database/ONS
 House of Commons Library, Financial Services: contribution to the UK economy, 21 August 2012
 Haver Analytics UK database/ONS
 PwC, Emerging opportunities: Financial services M&A in Asia 2011, Events & Trends, November 2011
 TheCityUK, ‘UK and the EU: A Mutually Beneficial Relationship’, 2013
 CRA International, ‘Evaluation of the economic impacts of the Financial Services Action Plan’, 2009
 CRA International, Evaluation of the economic impacts of the FSAP, March 2009
 TheCityUK, ‘Driving competitiveness: securing the UK’s position as the location of choice for financial and related professional services’, 2012