As part of its commitment to advance our understanding of the role of UK financial services in driving economic growth, the Financial Conduct Authority (FCA) launched a research competition to fund 3-month-long innovative projects exploring growth, competitiveness, and regulation in the sector. Six projects were awarded funding of up to £30,000 in January 2025 to produce fresh insights into some of the most pressing challenges and opportunities facing the industry today.
The LSE Growth Lab, led by Professor Richard Davies at the School of Public Policy, was awarded £30,000 for their proproject on improving the measurement of productivity in UK financial services.
The team's completed report explores how the UK economy has struggled with low productivity growth since the global financial crisis (GFC), significantly lagging peer countries. Financial services, once of the UK’s most productive sectors, have seen a notable decline in productivity growth since the GFC, exacerbated by Brexit-related relocations and regulatory shifts. Since 2008, the UK’s financial sector has underperformed its counterparts in Canada, Germany, and France.
Accurately measuring productivity in financial services is a complex task. This report examines the measurement challenges associated with financial sector productivity, drawing on insights from our broader research on productivity and regulation. Additionally, the report emphasises the need for a proactive and adaptive regulatory framework that goes beyond measurement alone. The integration of micro and macro-prudential policies, along with efficient capital allocation enhancing market efficiency, play a critical role in managing financial risks to support financial sector productivity.
Achieving sustainable productivity growth in the financial sector requires a nuanced, evidence-based policy approach. By refining productivity measurement frameworks, fostering innovation and ensuring a balanced regulatory environment, the UK can enhance financial sector efficiency, support long-term economic resilience, and maintain its global competitiveness.
The team is proud to present their final report and findings to the broader academic and policy community. Join us in congratulating our researchers Richard Davies, Andrea Correa-Jimenez, Rahat Siddique, Louis Flamencourt, Carlos Gonzales-Berrocal and Sachin Iyer for their work!
From left to rigth: David Stallibrass (FCA Co-Deputy Chief Economist), Professor Richard Davies (LSE Growth Lab Director), Rahat Siddique (LSE Growth Lab Policy Manager), and Kate Collyer (FCA Chief Economist).
Read the LSE Growth Lab's full report here.
Discover the FCA's six competition winners.