Facts, Fictions and Forecasts: UKL20: Shrinking the Financial Sector (1980-2060)

Monday, July 13, 2026

UKL20: Shrinking the Financial Sector (1980-2060)

A 2026 change in political leadership in the United Kingdom (UK) triggered by a no-confidence vote, brings up the issue of what policies might be expected from the new Labor Government, potentially headed by Andy Burnham, champion of the Green New Deal UK. One of the core goals of the Green New Deal UK (see Notes below), based on analogies to the 1930s New Deal in the US, is to restructure the UK Financial Sector.

In this post, I am going to present an index of UK Financialization (FINZ) and how it might be affected by various Geopolitical Alignments as a result of Brexit, Britain leaving the European Union (EU).

The graphic above shows five possible Geopolitical Alignments and how they might affect the FINZ1 index (see Notes below, the growth component). Business-as-Usual (BAU) creates unlimited growth in the Financial Sector while other alignments (a Random Walk, RW, the US, the World System, W, and the EU) stabilize or contract the Financial Sector. The biggest contraction comes from alignment with the EU, which may have been another motivation for Brexit.

As a result of Brexit, the UK now has the opportunity to stabilize the Financial Sector by regulation Capital-Asset Ratios, Nonperforming loans and Commercial Banking growth. Whether it can redirect investment toward Green Energy Deployment is hard to predict. Although the UK has been every successful reducing CO2 Emissions; investments in dirty energy projects will not be very attractive.

Notes

A Green New Deal First Report of the Green new Deal Group
Stern Review (2006): The Economics of Climate Change
The Global Justice Report A plan for equality and prosperity within Planetary boundaries.
Institute for New Economic Thinking UK economists and thinkers from a range of disciplines who challenge conventional wisdom and advance ideas to better serve society.

UKL20 FINZ Indicator Codes

UKL20 FINZ Measurement Model

The components explain 96.7% of the variation in the indicators. FINZ1=(CommercialBanking-BankCapital-LiquidReserves). FINZ2=(BankCapital-NonperformingLoans), FINZ3=(Growth).

Historically, FINZ1 (Banking Capital and Liquid Reserves) was in balance until after 1975 as the period of Neoliberalism started. FINZ2 (BankCapital-NonperformingLoans) came into balance after 1965. FINZ3 (Overall Growth) was cyclical throughout the late 20th Century.