Britain and Banking – How the financial sector cost us £4.5 Billion.

Barclay’s have avoided a high-profile jury case and will face no charges in January when 4 high profile executives from the banking sector will face the justice system for events relating to the 2008 financial crash.

Barclay’s had been formally charged with 3 counts, including conspiracy to commit fraud by the Serious-Fraud Office, the reason for dismissal by the High Court cannot be revealed before the case of the 4 executives is heard in January. The investigation had treasury backing and the Financial Times reported that the investigation had accumulated millions of pounds in funding and represents a serious setback to the SFO and brings into question their ability to regulate and prosecute large companies in Britain.

Barclays denied the SFO’s allegation that a $3 billion loan it made to Qatar in November 2008 was connected with a Qatari investment in the British bank which ultimately helped it avoid a British government rescue during the financial crisis.

Despite the banking sector’s terrible track record in aiding the country, many see it as a key industry to defend. And it’s easy to see why.

A Parliament report earlier this year stated that in 2017, the financial services sector contributed £119 Billion to the UK economy, with 1.1 million jobs, and the sector contributed £27.3 billion in tax in the UK in 2016/17.

Chris Grayling called the City of London the nation’s ‘cash cow.’ All economic figures point towards the fact that Britain would be increasingly economically worse off if it were to be damaged, however, there should be concerns the ‘cash cow’ has become bloated.

A new report published by the University of Sheffield makes some startling accusations about the reality of having an unbalanced economy that revolves around financial services. The report claims that the financial crash in 2008 cost the UK economy £1800 billion in lost output, further still it says that an additional £2,700 billion is accounted for by the misallocation of resources where resources, skills and investments are diverted away from more productive non-financial activities into finance. To put that into perspective, UK GDP was £2.8 trillion in 2018. The UK economy took a similar path as to that of the US at the time of the Global Financial Crisis, but unlike the US growth did not rebound. Instead, the lacklustre investment that has been supplied by this Conservative economy has caused a decade of misery. Wages  3% lower than pre-crisis levels, bankers pay soaring, and bonuses equivalent to several years pay for an average worker were being paid out to the very individuals who had just dealt the economy a near fatal blow.

A damning report last year revealed that the UK has the most regionally unbalanced economy in Europe. The lack of industrial strategy since 2008 is a symptom of the neglect the Conservative’s have shown for the people of Britain. Economists are in agreement that the technological innovation is a sure way to ensuring economic growth and hence relies on Research & Development from companies, in the UK investment in R&D is measly at best, falsifying the belief that lowering corporation tax leads to investment.

There needs to be a bold new approach towards the Banking sector and what it actually contributes to the UK economy, the spiralling wages have meant that the housing market in London has become unaffordable for the average worker as extreme inflation in the sector has priced them out.

Furtherly, regions should be devolved more funding to have control over investment, including in housing and industry in order to redress our increasingly unbalanced economy. The new report on the effects of succumbing to the demands of banking at every opportunity are worrying, the lost economic growth caused by having an overly-large financial sector is twice the size of our current GDP.

What is worse, is that nearly every major economic crisis has been caused by the collapse of the banking sector, time and time again we pay for the overly-elaborate financial practices of bankers chasing digital numbers. Yet, as the nation pulls together to pay for bail-outs in order to rescue our pensions, mortgages and economic livelihoods, bonuses are paid, and it is the many that suffer. We should demand a government that would control the power of finance, make it more transparent and make it work for all. Fat ‘cat’ chance of that occurring.

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Seb Chromiak

I was born 09.10.1997, I currently study Economics and Politics at the University of Manchester and have an interest in Neo-liberalism, Russian Politics and Current Affairs.

Seb Chromiak has 15 posts and counting. See all posts by Seb Chromiak

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