Does Britain really gain from being a financial centre?

[tatt]

With all the talk about businesses moving abroad to escape higher rate tax I've been wondering just what Britain does gain by being a major financial centre? I realise that there will be tax on those activities (does anyone know how much?). There will also be jobs created servicing those with a lot of money.

However there is also a downside - like the inflation in house prices and the encouragement of a consumer society.

Can anyone point me to a serious attempt to examine costs and benefits?

The financial services industry is one of the biggest employers in the country and a massive contributor to the overall economy.

www.bba.org.uk/bba/jsp/polopoly.jsp?d=145&a=9652

Can't see how the 'costs' could possible outway the benefits.

Thanks for that. I'm looking for a rather more detailed analysis though. Tax havens like Switzerland and Jersey are noted for inflated property prices and a high cost of living. We are paying the price now - and will be for years - for bailing out financial institutions. Does that cost really balance past benefits?

anyone?

The banking industry provides jobs but should not have been bailed out. Much of the benefit has been frittered away by the bailout.

It did not need to be that way and politicians have backed down to the industry and it is shameful they have.

I say that as someone who has worked in the City and still have friends who do.

I agree about Jersey, Isle of Man, Switzerland property and cost of living and to some extent that happened in London as well in the boom.

Econmically, the financial services industry in the UK could be said to have caused a classic case of the 'Dutch Disease'.

Dutch Disease

"Dutch disease is an economic concept that tries to explain the apparent relationship between the exploitation of natural resources and a decline in the manufacturing sector combined with moral fallout. The theory is that an increase in revenues from natural resources will deindustrialise a nation?s economy by raising the exchange rate, which makes the manufacturing sector less competitive and public services entangled with business interests."

It could be said that the City is akin to a natural resource find (like North Sea Oil was in the 1970s) that to some extent destroyed the rest of the economy by diverting capital and human talent away fom other areas of more sustainable economic activity. It is also clear that bankers and politicians became too close and that the UK finacial services regulatory framework was deliberately weakened by politicians who were too keen to accomodate bankers wishes for 'light touch' regulation.

It is very difficult to measure the true economic impact though.

Agree that at least one bank should have been allowed to go bust. I would like to someone try to measure the risk/damage ratio - but I guess that will be someone's dissertation.