New Delhi, [India] July 7 (ANI): The UK's financial services industry, long regarded as one of the country's biggest competitive strengths, has lost momentum over the past 15 years and requires urgent structural reforms to regain its global edge, according to a new report by Boston Consulting Group (BCG).

The report argues that while the sector continues to rank among the world's largest, its contribution to domestic economic growth has weakened significantly.

'While the UK's financial services sector continues to appear a world leader on the surface, analysis beyond superficial metrics reveals fifteen years of underperformance,' the report said. It added that 'the virtuous circle - where a thriving financial sector feeds lending, investment and productivity growth across the economy - has broken down.'

According to BCG, the sector would have been around 40% larger had it maintained its pre-financial crisis growth trajectory, translating into an additional Pound 66 billion in output and nearly Pound 100 billion in wider economic value.

Despite the slowdown, the report highlights several enduring strengths. The UK remains the world's second-largest exporter of financial services with a 13-15% share of global exports over the past decade. It also hosts one of the world's most vibrant fintech ecosystems, having created 40 fintech unicorns over the past two decades while attracting a significant share of global AI talent.

However, BCG notes that these strengths have failed to translate into stronger domestic economic performance. Business lending has stagnated, productivity growth has turned negative, shareholder returns have lagged international peers, and employment in financial services has declined since 2011. The report also points to a sharp fall in pension fund allocations to UK equities, signalling weaker domestic capital formation.

The consultancy attributes the sector's underperformance to a combination of overly risk-averse regulation, declining business credit availability, chronic underinvestment in technology and weak growth in fee-based income. It argues that post-financial crisis reforms, while improving resilience, have inadvertently constrained growth and innovation.

To reverse the trend, BCG proposes four strategic priorities. These include embedding artificial intelligence across financial services, improving credit flows to businesses through new public-private lending mechanisms, positioning the UK as a global hub for digital asset infrastructure, and creating a new policy compact between government, regulators and the industry that gives growth equal importance alongside financial stability.

The report stresses that artificial intelligence should be viewed not merely as a cost-saving tool but as a growth driver. 'The most urgent AI opportunity for UK firms is not cost reduction, it is revenue growth,' it said, urging firms to use AI to deepen customer engagement, improve lending decisions and develop new revenue streams. (ANI)