Can the City drive Britain back to the economic fast lane?

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The Independent Online

Mike Warren, the finance director of HR Owen, purveyor of supercars to the ludicrously wealthy, is happy with life. The luxury car market is growing, and he has a lengthy waiting list of buyers for Ferrari's new toy, the £200,000 458 Spider.

Fewer of his buyers are coming from the City, splashing bonus money around. Bonuses are predicted to be barely a fifth of their £11.6bn 2007 peak this year. Mr Warren says: "We cater for a fairly broad church, from the successful entrepreneur to wealthy overseas types living in London. It's not all about the City. As one sector falls another rises – if the City is a bit quiet, other areas are buoyant."

If HR Owen isn't hurting too badly from the malaise in the Square Mile, the same can't be said for the wider economy, and the public finances in particular.

Corporation tax payments from financial services, more than £12bn before the crisis in 2007, are down more than 40 per cent, at just over £7bn, but started to recover last year as banks regained profitability and used up their previous offsetting tax losses, according to PwC.

Those banks are by far the biggest contributors to the Treasury coffers: they accounted for a third of the firms in financial services, but two-thirds of the tax collected. Banks paid £3.5bn in corporation tax in 2011, an increase of 67 per cent over the previous year, but still 52 per cent down on 2007.

Another thing worth pointing out is that while the UK has run a trade deficit in manufactured goods for decades – which tends to get more attention because it is more easily measured than "invisible" services – financial services ran a trade surplus of £46.6bn last year, boosting the economy.

Chris Cummings, chief executive of the TheCityUK, is dismissive of rebalancing, and wants the Government to protect the City's global pre-eminence. He says. "Economies specialise – that's the truth of it. We live in a very competitive world, and other parts of the world are trying to grow their financial services. Germany is pitching for our business, and so is Asia. The UK is currently sitting on the sidelines while our major industry is being actively wooed.

Moreover, Carmen Reinhart and Ken Rogoff's seminal This Time Is Different – a study of 66 countries and eight centuries of default and financial calamity – shows that the recovery from severe financial crisis is more protracted than from a normal recession. It also underlines why institutions like the Bank of England are desperate to spur on credit through the £80bn Funding for Lending scheme.

With growth set to disappoint again when the Chancellor unveils the Office for Budget Responsibility's latest forecasts in December, the Square Mile – and the financial service sector in general – has to shoulder its share of the blame.

It also has the mother of all PR jobs on its hands to convince a sceptical public that it won't be the handbrake on rest of the British economy for years to come.