outside london. financial services run a trade surplus of 3 % of gdp, while the rest of the economy runs a deficit almost twice as large. last year, the uk financial system channelled £300 billion in finance to uk businesses and helped 700, 000 households to purchase homes. it provides pensions to 21 million people and insures the contents of 20 million homes. it contributed 11 % of annual tax revenues or over £1¼ billion per week in 2016. employment and tax data is from “ total tax contribution of uk financial services, tenth edition ”, city of london & pwc, november 2017. lending data from bank of england statistics and calculations. all speeches are available online at www. bankofengland. co. uk / speeches internationally, the uk is the pre - eminent financial centre. it accounts for 40 % of global foreign exchange volumes and trades in over - the - counter interest rate derivatives. more international banking activity is booked here than anywhere else. the uk hosts the world ’ s second largest asset management and fourth largest insurance industry. the city is europe ’ s investment banker, and it is leading the internationalisation of green, islamic, renminbi and rupee finance. being at the heart of the global financial system reinforces the ability of the rest of the uk economy, from manufacturing to the creative industries, to compete globally. and it broadens the investment opportunities and risk - adjusted returns for uk savers. this evening, i want to set out some of the ways the uk financial system can continue to serve the uk and the world in the face of major structural changes. ii. core attributes of uk leadership the city ’ s pre - eminence reflects lessons learnt over the centuries that an effective financial system must be resilient, fair and dynamic. resilient so that it can finance households and businesses through good times and bad. a resilient system is anti - fragile – robust even to risks we do not anticipate. to this end, we have comprehensively reformed the financial system since the crisis. both capital requirements and contingent liquidity have increased ten - fold. the major uk banks now have the balance sheets to withstand a disorderly cliff - edge brexit, however unlikely that may be. a series of measures have eliminated toxic forms of shadow banking and are transforming the rest into resilient market - based finance. an effective financial system is fair : fair to end - users and fair to the taxpayers who provide the ultimate backstop

months, generally remain at levels that continue to point to ongoing growth. our main scenario remains that of real gdp growth broadly in line with trend potential. the fundamentals of the euro area economy are sound, profitability has been sustained, employment growth has been robust and unemployment rates have fallen to levels not seen for 25 years. consumption growth should therefore continue to contribute to economic expansion, in line with real disposable income, and investment growth should provide ongoing support. on the expectation that the global economy will, on balance, remain resilient – with the slowdown in economic growth in the united states being mitigated by the continued strength of emerging market economies – external demand should support euro area exports. that said, uncertainty about the prospects for economic growth remains high and the risks surrounding the outlook for economic activity lie on the downside. the latter relate mainly to a potentially broader than currently expected impact of the ongoing reappraisal of risk in financial markets on financing conditions and economic sentiment, with a negative impact on world and euro area growth. further downside risks stem from the scope for additional oil and other commodity price rises, concerns about protectionist pressures and the possibility of disorderly developments due to global imbalances. with regard to price developments, according to eurostat ’ s flash estimate the annual hicp inflation rate was 3. 1 % in december 2007, unchanged from november. this confirms the strong upward pressure on inflation in the short term, stemming mainly from strong increases in oil and food prices in recent months. looking ahead, the annual hicp inflation rate is expected to remain significantly above 2 % in the coming months and is likely to moderate only gradually in the course of 2008. hence, the period of temporarily high rates of inflation would be somewhat more protracted than previously expected. moreover, it is important to stress that the expectation of a moderation in the rate of inflation – which is embedded in the december 2007 eurosystem staff macroeconomic projections – assumes some reversal of the recent rises in commodity prices – in line with what is currently captured by futures prices – and, more fundamentally, that recent oil and food price dynamics and their impact on hicp inflation do not have broadlybased second - round effects on wage and price - setting behaviour. risks to this medium - term outlook for price developments are fully confirmed to lie on the upside. these risks include the possibility that stronger than currently expected wage growth may emerge, taking into account capacity constraints and the positive developments in