Late Lunchtime Links: The UK government’s big problem – people working in financial services generate 5 times more tax than anyone else

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Tax

Today’s revelations about the tax take from the UK’s financial services industry help indicate why it was that David Cameron was so keen to garner an EU regulatory opt out for the UK banking industry: it generates £63bn a year in taxation, more than 12% of the country's total.

This is particularly impressive, when you consider that –  retail bankers, insurance brokers and call centre staff included - the UK financial services industry employs only 1 million people, or around 2.6% of the population of working age and only around 4% of the working population (according to the City UK).

In absolute terms, the UK’s total tax take is £525bn and the UK population of working age is around 38 million. On average therefore, tax generated per individual of working age in the UK is therefore £14k. However, the 1 million people working in the financial services industry generate an average of £63k in total taxes per head, whilst the other 37 million people of working age generate an average of £12k.

Needless to say, the figures aren’t infallible: the unemployed are included in the 37 million. Equally, however, of the 1 million people working in financial services in the UK, fewer than 288,000 or less than 1% of the working population are based in the City. It doesn’t seem unreasonable to assume that they alone generate more than 7% of the country’s tax take. While the UK economy needs to rebalance away from financial services, doing so whilst reducing the country's budget deficit is not going to be easy.

To spite the UK, the EU may weaken October’s agreement to grant national regulators powers over clearinghouses. If so, EU clearing firms will come under pressure to move part of their business to the EU. (Bloomberg) 

Average pay per employee in financial services rose to £41.8k, nearly double the UK national average of £23.4k. (Financial Times) 

The City would most favour: open trade between theUKand the rest of the EU, with financial regulatory autonomy but complete reciprocity. (Financial Times) 

Collins Stewart is being taken over by Canaccord. (The Times) 

Rupert Fraser, head of equities, has left Evolution just before it’s taken over by Investec. (Financial News) 

Fitch has downgraded BAML, Barclays, BNP Paribas, Credit Suisse, Deutsche, Goldman Sachs, Morgan Stanley and UBS. (Alphaville) 

Morgan Stanley’s cuts in fixed-income trading will come primarily from businesses such as securitization that the firm is looking to shrink as it faces new capital rules. The firm won’t eliminate a significant number of jobs in the interest-rate and foreign-exchange trading businesses that it expanded in 2009 and 2010. Equities trading will likely be less affected by the cuts than other areas, the person said. (Bloomberg) 

Morgan Stanley shares are down about 45% this year, and are trading at about half of book value. (Financial Times) 

BarCap is suddenly doing very well in UKM&A and is now third, with a market share of nearly 20%. In the last 5 years, it’s never achieved anything higher than 8th. (Telegraph) 

Lloyds’ chief 'did not sleep for five days.' (Guardian)  

Lloyds’ did chief did not sleep for three days. (The Times) 

Credit Suisse is now requiring its traders to take two weeks of "block leave" - where they are required to disconnect completely from their offices, their computers and their Blackberries. (Marketplace)  

The behavioural economist’s guide to buying presents. (The Atlantic)

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