However, the company said current reforms to regulation were “constraining” the products and advice available to the consumer.
The report, “Where next? Assessing the current and future contribution of the UK Financial Services sector”, launched today, also said if the contribution by financial services was ‘weaker’ the wider economy could see a smaller GDP rise of 0.2% with only 12,000 extra jobs.
Key findings from the report included:
• About 218,000 more jobs could be created in the wider economy across the UK and approximately 47,000 additional jobs in the financial services sector by 2020
• GDP could be 2% to 3% higher by 2020 if financial services gross value added (GVA – contribution to wider economy) rises by £50bn between 2013/14 and 2020/21
• With weaker financial services growth and if its GVA contribution rises by £9bn, UK GDP could only rise by 0.2% and create 12,000 additional jobs by 2020/21
PwC UK financial services leader Kevin Burrowes said: “A thriving financial services sector is essential to the UK economy. It is important that financial services reforms are balanced against the performance of the sector, and its contribution to the overall UK economy.
“Many aspects of financial services reform are currently constraining the advice and products financial services institutions can offer to customers, making competition improvement in the sector difficult to achieve.”
He added: “While limiting the likelihood and impact of future crises must be a top priority, better regulation does not necessarily mean more regulation. The UK needs some re-balancing of financial services regulation to unlock the industry’s potential in a sustainable and stable way to achieve the contribution that financial services can clearly give to the economy.”
Burrowes commented financial services had contributed both positively and negatively to the UK’s economic growth in the past ten years.
“While the sector has contributed significantly to investment and job creation throughout the country, 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 policymakers is the provision of effective UK and EU regulation that limits the likelihood and impact of any future crises, while allowing both the financial services sector and the wider economy to prosper.
“Our analysis suggests that the links between the financial services sector and other sectors across the UK economy are strong.
“This shows the important contribution the sector makes to the UK economy across all regions, but also highlights the profound effect that financial services regulation or changes in financial services performance can have on non-financial services business,” said Burrowes.
PwC economists based their predictions on two economic scenarios: one with regulation that facilitated growth, along with a positive economic environment. The other with financial services constrained by both a global economic downturn and heavier regulation.
Additional report findings:
• The financial services sector is a critical business input: Business bought more than £113bn of financial services in 2010 (most recent official data available).
• 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.
