Insurance net exports hit £8.3bn

Net exports in insurance have reached a record £8.3bn compared to the overall UK financial sector which fell by 17% in 2010 to £41.8bn from the 2009 peak, but still exceeded any previous year.

According to the annual UK Financial Sector Net Exports report released today by TheCityUK, banks, securities dealers, fund managers and shipbrokers all experienced a drop in net exports.

Banks remain the largest contributor, despite the fall in net exports from £31bn to £25.3bn. This was mainly due to a 35% drop to £9.9bn in Financial Intermediation Services Indirectly Measured (FISIM).

Spread earnings were also down at £10.6bn. Together, spread earnings and FISIM accounted for 81% of banks’ net exports. Fee income rose to £4.0bn from £3.1bn.

Securities dealers experienced the biggest drop in net exports, down nearly two thirds to £1.4bn while fund managers dropped by nearly a third to £2.9bn. Shipbrokers were down by 14% to £820m.

Professional services offered by legal and accounting services and management consultancy generated a trade surplus of £6.4bn in 2010.

The quarterly financial services trade surplus has been on a downward trend in recent quarters. Since spiking to £13.1bn in Q4 2008, it has dropped to £9.2bn in Q1 2010. If the trade surplus were to stay at around the Q1 level during the remainder of the year the annual trade surplus for 2010 would fall by 8% to £37bn from £40bn in 2009.

Duncan McKenzie, senior manager economic research at TheCityUK, said: “Despite the impact of the global slowdown in 2009, the continuing importance of the financial sector is indicated by its £42bn net export contribution offsetting half of the £82bn trade deficit in goods.”