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Researchers from the centre for economics and research (cebr) which undertook the study for the City found that EU wholesale finance is now worth 173 billion Euros, or 1.6% of the Union’s gross domestic product. In 1995, that figure was at 1.3%.
Unlike previous reports commissioned by the City, this one examines the contribution of the wholesale financial services sector to the EU in the context of the changing global economy and the report comes with a warning against complacency.
Because of faster domestic economic growth and a more flexible and integrated economy, wholesale finance in the US has outperformed wholesale finance in the EU over the past eight years. The report concludes this trend is likely to continue, unless the EU’s policies encourage faster growth in the sector.
It also examines the likely impact on the EU of the large emerging global economies. In real terms, China’s wholesale financial sector is growing at nearly three times the pace of the EU’s and now accounts for 4% of the world market.
The report discusses a number of scenarios for the future of the wholesale finance sector to 2020. A high growth scenario would enable EU wholesale finance sector growth to accelerate to an average 5.1% pa (compared with 4.8% pa during the period 1998-2005).
But the scenarios also contain a number of warnings. Under the base case scenario, reflecting current policy and economic structure, growth in the sector slows to 3.5% pa, and all other countries/regions considered outperform the EU. Other scenarios paint a bleaker picture, reflecting the potential introduction of inappropriate regulation and growing market protectionism.