Continued innovation will be needed to sustain the growth of Canada’s financial services industry, suggests a new report from the Conference Board of Canada.
According to the report, Canada is a large, and growing, exporter of financial services capital. In 2016, outward foreign direct investment (FDI) attributable to the financial services sector came in at $505 billion, more than double the level in 2006, the report says, and accounting for almost half of all Canada’s outward FDI.
The sector’s exports have also more than doubled over the past decade, the report says, largely due to “other financial services,” which includes securities issuance, trading, and asset management services. “In fact, financial services are Canada’s largest and fastest growing services export category,” the report says.
Overall, the financial services sector has grown by 28% over the past 10 years, according to the report, and as of 2016, it accounted for over 800,000 jobs (4.5% of total employment), and 7.2% of Canadian GDP.
“Respondents to our survey identified several things that will be necessary if the sector is to continue experiencing above-average growth. These include attracting more inward FDI, better marketing of the sector internationally, fostering further innovation, and ensuring the availability of a workforce with the right skills,” the report says.
Within Canada, Toronto is increasingly dominating the financial services sector, the report also notes. Bay Street now accounts for over a third of the country’s financial services jobs, up from less than 30% in 2006. In addition, the financial sector is second only to the public sector in generating GDP within the city; directly accounting for 8.5% of jobs and 13.8% of GDP.
Moreover, the financial sector also generates another 227,000 jobs in related industries, such as accounting, consulting, and legal services. More than half of those jobs are in Toronto, too, the report says.
The report stresses that Toronto’s position cannot be taken for granted. For example, it notes that fintech, “has the potential to cause significant disruptions to the sector’s large incumbent firms.”
“Ongoing innovation is critical if the sector is to continue being a source of growth for both Toronto and Canada,” the report suggests.
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