In that context, and fully consistent with the priorities of Her Majesty’s government, the Bank of England will work to build a responsible financial globalisation that first protects and serves the UK real economy, and then secures the UK’s traditional role of supporting global prosperity through an open global economy. II. The UK Financial System is a National Asset and a Global Public Good  Having a large financial sector brings substantial benefits to the UK. 4  Financial services accounts for 7% of output and is a source of over 1 million jobs, two thirds of which are outside London. It contributes around £ or 11%, of annual tax revenues. 5  Financial services are the UK’s most important exports, running a trade surplus of around £ or 3% of GDP. The rest of the economy runs a deficit almost twice as large. Being at the heart of the global financial system reinforces the ability of the rest of the UK economy, from manufacturing to the creative industries, to compete globally. And it broadens the investment opportunities for UK savers, giving them the potential to earn better risk-adjusted returns. But the UK’s financial system is more than a national asset. It is also a global public good. 6  The UK is the leading internationally active financial centre. It has the largest global share of cross-border bank lending and foreign exchange trading, the second largest asset management industry, and the fourth largest insurance industry in the world.
The Bank’s primary one is, of course, to ensure that the UK financial system serves UK households and businesses. This includes protecting the UK real economy from being sideswiped by global developments. As much as possible, we must do so in a manner that keeps cross-border markets open. When these responsibilities come into conflict, we have to work with others to build resilience at home and abroad in the most efficient and cooperative way possible. The pillars of responsible financial globalisation eroded prior to the global financial crisis. Regulation became light touch and ineffective. Looming risks in the financial system were ignored. Markets were fragile and unfair, plagued by numerous instances of misconduct and limited market discipline on large firms. And few participants were exposed to the full consequences of their actions as governance and compensation arrangements focused on the short term. 1  For example, Britain accounted for nearly 20% of the world’s manufacturing by the mid-19th century. At the end of the 19th Century, the UK accounted for as much as a quarter of world trade and produced around a tenth of global GDP. Today, those shares have both fallen under 5%. For details on how the historical estimates are calculated, see ‘The UK at the heart of a renewed globalisation’, speech given by Mark Carney, 24 October 2013, available at http://www.bankofengland.co.uk/publications/Documents/speeches/2013/speech690.pdf. 2  2  All speeches are available online at www.bankofengland.co.uk/speeches  2  The resulting cost to our citizens has been tremendous.