Read our other exclusive online responses to Adair Turner from George Magnus, Oliver Kammand Robert Kuttner
Judging by his comments in this month's Prospect, FSA chief Adair Turner is worried that Britain's financial sector is too large. In 2008 its financial services surplus was £40-£45 bn. Most of this activity occurred in London; a very high proportion within the Square Mile. But how can the financial sector be “too large” for us as a nation? The bulk of the value added reflected sales to other countries. In particular, fees, margins, spread profits and so on are received from large multinational companies, which need these services and find that London is the best place to get them. As far as the British are concerned the receipts are from foreigners and enable us to import on a similar scale. Given that Britain's financial services sector is so great an exporter, it is ludicrous for Adair Turner to allege that the sector has grown too much. How can any export industry be too large for the country that hosts it?
Or is Turner claiming that Britain's financial sector, and the City more specifically, is over-sized compared with world output? Well, with world output in 2008 at over £40,000bn, the Britain's gross financial exports were about 0.1 per cent of the total. Yes, for just one Square Mile, that one-thousandth of world output is pretty impressive. But in what sense can 0.1 per cent of world output have been excessive? And are the British supposed to be anxious or ashamed that at least one part of our country is so fantastically productive?
Britain has been pre-eminent in a range of international financial services. These industries demand high levels of numeracy, skill and judgment, and are accordingly well-paid. As with all successful industries, some people have become very rich. Britain needs to specialise in areas like this if it is to remain a relatively wealthy society in the 21st century. For the chairman of the Financial Services Authority to chastise these industries—industries which produce net exports equal to about 3 per cent of our national output and are disproportionately heavy taxpayers—is appalling. For a top regulator to condemn the industries he is supposed to oversee would be bizarre in any circumstances, but in this case it also amounts to a form of national economic suicide.
More debate on the Turner interview will be featured in the October issue of Prospect, published 24th September
Judging by his comments in this month's Prospect, FSA chief Adair Turner is worried that Britain's financial sector is too large. In 2008 its financial services surplus was £40-£45 bn. Most of this activity occurred in London; a very high proportion within the Square Mile. But how can the financial sector be “too large” for us as a nation? The bulk of the value added reflected sales to other countries. In particular, fees, margins, spread profits and so on are received from large multinational companies, which need these services and find that London is the best place to get them. As far as the British are concerned the receipts are from foreigners and enable us to import on a similar scale. Given that Britain's financial services sector is so great an exporter, it is ludicrous for Adair Turner to allege that the sector has grown too much. How can any export industry be too large for the country that hosts it?
Or is Turner claiming that Britain's financial sector, and the City more specifically, is over-sized compared with world output? Well, with world output in 2008 at over £40,000bn, the Britain's gross financial exports were about 0.1 per cent of the total. Yes, for just one Square Mile, that one-thousandth of world output is pretty impressive. But in what sense can 0.1 per cent of world output have been excessive? And are the British supposed to be anxious or ashamed that at least one part of our country is so fantastically productive?
Britain has been pre-eminent in a range of international financial services. These industries demand high levels of numeracy, skill and judgment, and are accordingly well-paid. As with all successful industries, some people have become very rich. Britain needs to specialise in areas like this if it is to remain a relatively wealthy society in the 21st century. For the chairman of the Financial Services Authority to chastise these industries—industries which produce net exports equal to about 3 per cent of our national output and are disproportionately heavy taxpayers—is appalling. For a top regulator to condemn the industries he is supposed to oversee would be bizarre in any circumstances, but in this case it also amounts to a form of national economic suicide.
More debate on the Turner interview will be featured in the October issue of Prospect, published 24th September
