I always find it difficult to get an accurate and up to the minute picture of how the UK financial services industry is faring. Of course, there are the excellent analyses published by TheCityUK on various sub-sectors of the UK financial services industry and on the contribution of the industry to the overall economy, there are also the Bank of England Bankstats and the National Statistics figures. None, however, provide timely and detailed information on what is actually happening on the ground in terms of the number of firms that have been set up and in what sub-sector.
For these reasons, I find the surveys published by IMAS, as a by-product of their mergers and acquisition activity, really interesting. They have mapped out the UK financial services industry by cross-referencing the FSA register with their own data. As a result, they are able to measure the changes happening to the industry.
For the first time since 2007, the 2010 annual review shows an improvement overall, both in the number of people approved by the FSA and in the number of firms authorised. In London as in other major financial centres, the impact of the financial crisis is still being felt and there is still a net decline in the number of firms authorised by the FSA but this decline is a lot lower than in previous years at 540 in 2010 versus 1478 in 2009. Moreover, since it takes longer today for a firm to get authorised by the FSA, following changes to the authorisation process – 135 days compared to 80 days in January 2010 (according to figures from IMS Group), there are a number firms that are waiting to get authorised. It is possible that if the length of the authorisation process had stayed the same, there would already be a net increase in the number firms authorised.
Another interesting piece of information is that 90 new hedge funds have setup in the UK in 2010. Recent legislation in the United States limiting banks’ proprietary activities may have had an impact. However, this figure represents a 50% increase from 2009.
Finally, global interest in the UK remains very strong with 93 overseas backed financial services firms having been authorised in 2010. Most of these – 40%, were in asset management but other sectors with consistent overseas interest include securities trading, private equity and corporate finance. From a geographical perspective, 62% of foreign investors were from North America, 17% from Europe and 21% from Asia and Africa combined.
No doubt that these developments will eventually appear in official statistics; for now, the IMAS survey is providing us with an early outlook of the situation in the UK financial services industry