City's overseas earnings rise

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The City's net overseas earnings rose sharply to pounds 20.4bn in 1994, up from pounds 15.5bn in 1993.

"The financial sector once again delivered a sparkling performance reinforcing its position as the UK's largest net contributor to the current account," said Alison Wright, director-general of British Invisibles.

At pounds 10.7bn, net earnings from services accounted for over half the total, up from pounds 9.5bn. Banks contributed the lion's share of pounds 7.2bn, up from pounds 3.8bn thanks to a big increase in the net margin earned on lending to and borrowing from overseas. Securities dealers' share of services fell back sharply from pounds 2.8bn in 1993 to pounds 1.1bn, mainly because of a collapse in dealing profits.

British Invisibles' inclusion of banks' net margin and securities' dealing profits in its definition of services does not accord with the conventional presentation in the national accounts.

For example, the net margin on lending and borrowing overseas comes under the category of investment income. However, it is expected to be reclassified as services in the national accounts within a couple of years.

On a conventional balance of payments basis, the financial sector's net earnings from services fell from pounds 5.3bn to pounds 4.7bn in 1994. By that token, investment income as defined in the national accounts was principally responsible for the surge in the City's invisible earnings. About pounds 7bn of the total net overseas earnings in 1994 came from portfolio investment, in which the financial sector acts as intermediary to the ultimate recipients of the income.