Information bleg

What is the City\’s contribution to UK GDP?

I\’d like to nail down an accurate figure. No, not \”financial services\” for that includes all sorts of domestic insurance etc. What I\’d like to know is that does The City contribute? I\’ve got a Willem Buiter figure of 4% which seems low. Anyone got something better?

7 comments on “Information bleg

  1. You have to be quite careful as it’s a lobby group, but I think ‘British invisibles’, now http://www.ifsl.org.uk/output/, collates this sort of thing

    4% might be right – I think the workforce is 250,000, so about 1% of the workforce, and that would suggest average output is 4 times national average output.

  2. I saw the figure of financial services (UK as a whole) being 10% of GDP bandied about recently.

    Problem is definition.

    Gross income from abroad is probably not too contentious, but you’d have to minus off all the salaries that are paid to short term residents that go straight back abroad again.

    It is a well-known fact that gross UK household/non-financial business deposits are about one times GDP and household/non-financial business debts (mainly mortgages) are a bit more than one year’s GDP. Assuming an average interest rate spread of 2% would suggest that gross profits of banks (before running costs) are also about 2% of GDP.

    Query, how much of this ADDS to GDP and how much of this is just money sucked out of GDP – e.g. if house prices had only doubled and not trebled, then gross deposits/lending might only be half of GDP (like fifteen years ago), in which case bank’s gross profits would be 1% of GDP (plus unknown figure for earnings from abroad).

    Would our total GDP be lower or higher had we not had a house price/credit bubble? Methinks it would, ergo, total domestic contribution to GDP might be slightly negative (before adding back invisiable exports).

  3. Matthew, because if Johnny Foreigner works for UK branch of Overseas Bank, and is paid £10,000 salary into his UK bank account and £20,000 salary into his Channel Islands account for him to pick up on his way home after a couple of years, that money is not part of UK GDP, it is simply not earned or spent here in any meaningful sense.

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