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UK financial services - Essay Example

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(Author’s Name) (Institutional Affiliation) UK FINANCIAL SERVICES Abstract The United Kingdom financial services sector is one of the largest (if not the largest) in the world. It contributes billions of pounds every year (?37 billion in 2007) to the UK economy, and employs over 2 million people…
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Download file to see previous pages This in turn led to a sequential inductive effect on other countries’ economies, which eventually caused a global financial crisis. This shows the power that that the United Kingdom’s financial services sector wields. This paper will discuss various aspects of the financial services sector in the UK, including the main financial services product types and their functions; financial advice; UK taxation and social security systems; and inflation, interest rate volatility and other relevant socio-economic factors. By the end of this paper, I hope to have examined, evaluated, and discussed the United Kingdom’s financial services sector with regards to these aspects. Key words Financial services; interest rate volatility; inflation; social security systems i) The Main Financial Services product types and their Functions Banking UK banks are generally public limited companies (plcs) that are owned by shareholders.The banking sector in the UK has the second largest assets in the world ($11 trillion). It offers borrowing and lending services, corporate financing, financial advice, and other financial services. The Bank of England regulates lending and borrowing rates by setting interest rates. By doing this, it also regulates foreign exchange services, cost of goods and services, the money market, and the cost of doing business. When it comes to international banking, the UK is the largest individual market for bank borrowing and lending. Approximately 20% of cross-border trading and 22% of borrowing is organized in the UK. The county also has a long tradition of well-developed systems for processing complex transactions, as well as a strong regard for corporate activity. The UK banking industry is very diverse, and this is shown by the presence of over 551 international banks in London alone in 2007. By comparison, New York has 250, Paris 271, and Frankfurt 280 (British Invisibles 2009, pg. 22). The UK also has very dynamic money markets which cater for institutional/corporate customer activity in forward and spot markets as well as the proprietary trading activities of banks. In April 2009, the United Kingdom estimated to have a 36% share of the total worldwide foreign exchange turnover with around $1.7bn daily. Local retail banking is entrenched in the UK, with 5 big banks leading the way. These are Lloyds Banking Group, Barclays, HSBC, Santander, and RBS Group. Together, these banks control around 65% or more of the total retail banking market in the UK (Copperfield 2010, pg. 27). There are about 52 building societies which complement banks. The largest of these are Yorkshire, Skipton, Coventry, and Nationwide. There are also a couple of retail groups (Marks & Spencer, Tesco and Sainsbury’s) which provide a variety of financial services products ranging from current accounts to credit cards and insurance (Copperfield 2010, pg. 33). Capital Markets Securities trading and issuance (including trading of commodities and derivatives) is done by more than 170 firms headquartered London, and is dominated by international banks like Barclays Capital, Goldman Sachs, Bank of America, Citigroup, Morgan Stanley, Merrill Lynch, and JP Morgan. It is a sub-sector that is also consolidated since 60% is controlled by the top seven entities. The UK accounts for about 25% of the total banking fee revenues in the Europe, while London ...Download file to see next pagesRead More
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