By Dr Laura Davison, Head of Research at the Economic Development Office, City of London Corporation
Across the UK economy, there were 5.5 million private sector firms in 2016 - 0.1% were large firms (employing 250 people or more), jointly accounting for 40% of employment and 53% of turnover. My recent blog highlighted how particularly important these large firms were in financial services (FS), with the 355 large FS firms (0.4%) accounting for 72% of the sector’s jobs.
New data from the Office for National Statistics (ONS) now lets us look at the turnover and employment profile of really large firms - data not usually available - so in this week’s blog, I’ve analysed the impact of the largest FS firms on the UK economy in terms of turnover; next week’s blog will cover employment.
Although relatively small in number - 2% of the UK’s 2.55 million VAT / PAYE-registered firms - financial services firms accounted for a disproportionately high proportion of UK turnover - 24%. Alongside this, FS had the largest number of firms in the highest turnover band – those with annual turnover of more than £1billion; there are 455 such firms in the UK – 115 of these are FS firms.
These 115 FS firms with very high turnover played a huge role in generating the sector’s total turnover – although only 0.2% of FS firms by number, they generated 88% of the FS sector’s turnover. Not only is this highly significant in terms of the role this small number of firms play, it also reflects that financial services turnover is much more significantly generated by very large firms than in other sectors. You can see this difference in the following chart - for UK data excluding financial services, the equivalent figure is 38% of turnover generated by firms with £1 billion plus turnover.
In fact, as the next two charts show, if you look at the 99.8% of FS firms with less than £1 billion turnover, their profile is broadly proportionate in the UK context – 2% by number and 6% of turnover.
Whereas the small group of £1 billion plus FS firms are much more significant – 25% by number and 42% by turnover.
In fact, even looking at these 115 firms in the wider context of the UK economy – where they constitute 0.005% of the UK’s VAT-registered firms - they accounted for 21% of the total turnover. This gives you an idea for just how sizeable these large FS firms are and how large a role they play, both within the financial services sector and across the UK economy as a whole – and next week, we’ll be looking at whether the same holds true in the employment patterns.