Economic Impact
Economic development is directly influenced by the financial system. The size and scale of the finance sector in the UK have an enormous impact on the economy. The finance sector in the UK is attributable to about 8 per cent of GDP and employs over one million people (www.city of London.gov.uk).
The UK also plays a leading role in contributing to economic development around the world. London is the banking centre of the world and Europe’s main business centre (www.london.gov.uk). This position provides many economic benefits including supporting and stimulating employment, attracting skills and talent and driving the growth of businesses and communities.
However, when the financial system is weakened this too has an impact on the economy and a direct negative impact. When inter-bank lending, commercial paper lending, and money markets come to a standstill, lending to corporations and households freezes. Spending, production and employment levels fall. Governments and central banks are very aware of these huge risks to the UK and global economy.