“Virtually the entire UK financial system continues to be backstopped by a range of explicit and implicit state guarantees.” For those hoping for a swift recovery of the financial services sector in Britain, the EIU’s latest industry report for the country will make for disappointing reading (link for subscribers; link to online store for non-subscribers).

Britain’s large financial services industry was hit particularly hard by the global economic downturn. The official response to the crisis has pushed policy into “uncharted waters”, the report notes. The country’s banks need to refinance more than £1trn (US$1.5trn) over the next five years, including funds that have been supported by the state. The removal of support measures, bailout repayments, additional write-downs and challenging market conditions will make life difficult for lenders and constrain the flow of credit for years to come. A tepid economic recovery also clouds the outlook for insurers, asset managers and exchanges.