Read our independent FCA-commissioned research exploring how UK financial services hubs relate to regional growth, productivity and SME access to finance.
Overview
We commissioned two independent research papers examining the relationship between financial services, regional economic outcomes, and the geography of finance in the UK.
The research was commissioned under the FCA’s secondary international competitiveness and growth objective (SICGO), to develop the evidence base on two questions:
- Through what channels do financial services hubs contribute to UK GDP growth?
- Do regional financial services hubs generate distinct growth benefits compared with additional growth in London?
The papers explore how the location, type and distribution of financial activity may shape firm performance, access to capital, and regional productivity. Together, the papers contribute to the evidence base on the relationship between financial services and UK growth.
The papers
Paper 1: Regional financial development and growth in the UK (PDF)[1] – Dr Stefanos Ioannou and Dr Andra Sonea (Oxford Brookes University) and Professor Dariusz Wójcik (National University of Singapore). This paper analyses bank lending to SMEs, branch density, stock market listings and FinTech across UK ITL2 regions from 2009 to 2023, using panel data and spatial econometric models.
Paper 2: The role played by financial services clusters and centres in local, city and regional growth (PDF)[2] – Alfonso Silva Ruiz, Professor Michiel Daams, Professor Philip McCann, Professor Raquel Ortega-Argilés and Professor Colin Mayer (The Productivity Institute, University of Manchester). This paper uses gravity-model methods across all 361 UK local authorities and compares the UK with other European economies using commercial real estate investment data as a measure of investor risk perceptions.
Summary of key findings
- Financial services activity is associated with strong local productivity and income benefits, but these are highly concentrated and decline rapidly with distance from major financial centres such as London. The UK appears to exhibit particularly steep ‘distance penalties’, suggesting a more centralised, core-periphery financial structure than many international comparators.
- The distribution and type of financial activity appear to matter more than the overall size of the financial sector. Growth outcomes seem to depend on where finance is available and which financial services are accessible to firms and regions.
- Access to finance for SMEs appears consistently associated with stronger regional growth, whereas broader financial sector expansion shows weaker or less consistent links.
- Geography appears to remain an important determinant of financial outcomes despite digitalisation, with proximity, networks, and centralised decision-making appearing to shape access to and the cost of finance.
- These patterns may contribute to regional differences in economic performance in the UK, although the relationship between finance and growth is complex and not causally identified.
Areas the FCA will keep under consideration
The FCA notes the following themes as relevant to its objectives and will consider them alongside other evidence:
- access to finance and market functioning in SME lending, including the role of market structure, information and potential intermediation frictions, and
- whether a more explicit spatial lens may be useful in market analysis.
Important caveats
Both papers establish associations rather than causal relationships and carry meaningful methodological limitations. Findings should be treated as indicative and considered alongside other evidence.
The papers have not been subject to formal peer review. For example, the robustness of the findings on spatial spillovers and the use of proxy measures for financial activity could be areas for further examination.
The papers are based on data and conditions available in early 2026.
The views expressed are those of the independent authors and do not necessarily reflect those of the FCA. The FCA is publishing these papers to support transparency and debate, not to endorse specific conclusions or policy recommendations.