PFS Conference: Financial services to shrink to 5% of GDP

20 September 2010 0:00 am | Updated: 20 September 2010 3:43 pm | By Natalie Holt

The size of the financial sector is set to shrink to just 5 per cent of the economy by 2020, according to Capital Economics managing director Roger Bootle.

Speaking at the Personal Finance Society conference in Coventry today Bootle forecast that the financial services sector will contract from 9 per cent currently to 5 per cent in ten years’ time.

Financial services already accounts for a smaller proportion of the UK economy than manufacturing, which makes up 12 per cent of GDP.

Bootle told delegates: “I think the recovery in this country is going to be very differently shaped from normal, and that is going to have an impact on the sort of investments that do well and those that do not do well.

“The share of the economy accounted for by manufacturing is going to have to rise. The share of financial services is probably going to shrink, and other parts of the economy are going to pick up the slack.”

Bootle later sought to clarify that he did not expect the advice sector to shrink, but that it will be the City that will be hit hardest over the coming years.

He said: “The big banks and brokerage houses will be under a tight leash and will be very tightly regulated. I suspect the buccaneering activities of that sector have passed their high watermark.”

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