UK Finance, Finance UK

By: EconomyWatch   Date: 30 June 2010

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The UK finance community is one of the most important in the world. The City of London, or Square Mile, is arguably the most important centre for international finance, and second only to Wall Street in its influence. As of 2008, UK’s economy was the fifth largest in the world in terms of gross domestic product (GDP). Services and industry are the most critical sectors of the UK economy, accounting for 76% and 23%, respectively, of the nation’s GDP. The two sectors employ 99% of the country’s workforce.

London is among the world’s most important financial centers. According to World Trade Organization, the UK was the second largest exporter and third largest importer of commercial services and the seventh largest exporter and fourth largest importer of merchandise in 2008, making it a leading global trading nation.

After recording weak economic growth from the 1950s to the 1970s, UK’s economy started booming in the 1980s. From 1992 to 2007, the country posted economic growth in every quarter. This was the longest period of sustained economic growth in more than 150 years.

With its large financial services industry contributing 25% of all corporate profits in recent years, it is not surprising that the UK finance community has been hard hit by the Financial Crisis of 2008 onwards, with bank closures and nationalisations and redundancies leading to big drops in output, GDP and the value of the pound sterling.

UK Finance: Currency

Britain’s official currency is the Pound Sterling. Before the 1970s, the UK currency system had shillings, in addition to Pounds and Pence. A shilling was equal to 12 pennies and 20 shillings made a pound. After the adoption of the decimalization system in 1971, Britain did away with shillings.

The Pound Sterling is issued by the Bank of England and some other banks, like the Clydesdale Bank, Royal Bank of Scotlandand Bank of Ireland. These notes issued by these banks have a legal-tender status throughout the UK. Despite excessive global pressure, the country has not adopted the Euro as its currency.


UK Finance: Stock Market

All the stock market transactions in the UK take place at the London Stock Exchange (LSE). This stock exchange is the oldest and one of the largest bourses in the world. About 2,000 UK-based and 500 overseas companies are listed on the LSE. The UK stock market is not regulated and is, thus, popular among investors across the world. In 2007, the UK was the world’s second largest recipient of global foreign direct investment (FDI).

Finance in UK: Commodity Market

Commodities are traded on the London International Financial Futures and Options Exchange (LIFFE) and London Metal Exchange (LME). The LIFFE can be used to trade futures and options not only in London, but also in Brussels, Amsterdam, Lisbon and Paris. About €2 trillion worth of derivatives are traded every day on the LIFFE by customers across the world.

The London Metal Exchange is the world’s leading trading market for non-ferrous metals. The volume of trade at the LME reached 93 million lots in 2007.


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