I see the well-known economist and FT columnist John Kay has suggested that the financial services sector in Scotland will never recover from the failure of its two largest banks at the height of the banking crisis in 2008. Specifically, John Kay is reported as saying that
“We’re never going to recover the position that we had for centuries in banking – and that’s a tragedy.”
On the other hand, Owen Kelly, chief executive of industry organisation Scottish Financial Enterprise, responded with the comment that
“Scotland’s diversity as a financial centre – we’re not just providing banking but also asset management, pensions, insurance, asset servicing all kinds of other services – has given us resilience. In terms of job numbers, we are roughly where we were in 2008 – a much better outcome that some were expecting."
So, what is the evidence?
On the real value of output, the evidence to date favours Professor Kay as the chart below shows
Source: Scottish Government GROSS DOMESTIC PRODUCT 2nd QUARTER 2015, and FAI calculations
The real value of output in financial services in Scotland is currently -13.4% below the sector's pre-recession peak. This is little different from the -15.5% that was lost to financial services in Scotland as a result of the recession.
But, perhaps, one should never say never!
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