* Share may decline as Gulf, Asia centres expand
* Needs to work more closely with international partners
* Business groups welcome report
(Adds reaction)
By Frank Prenesti
LONDON, May 7 (Reuters) - Britain's share of the international financial services market may reduce as business expands in the Gulf and Asia, a government-sponsored report on the sector's future competitiveness said on Thursday.
To maintain its position as a world centre for financial
services, Britain needed to start working more closely with
overseas partners, said the report's co-chairman, Win Bischoff,
former chairman of Citigroup
"The cake will grow very much larger. It is likely, however, that with other financial services centres growing the proportion that we might have might actually slightly reduce," Bischoff told a news conference.
"What I think is terribly important is that, in global financial services, no financial centre, no international financial centre on its own can actually do all the kinds of things that it needs to do."
Britain's financial services sector employs more than one million people, accounts for 8 percent of national output and provides almost 14 percent of the nation's tax revenue.
However, it has been hit by the effects of the global credit crisis, with the decline in revenues from the sector one of the factors pushing the British budget deficit to 175 billion pounds ($265 billion).
PARTNERSHIPS
In order to maintain market share, Britain would need to look at partnerships with emerging markets such as Hong Kong, Singapore and Mumbai, he said.
Bischoff cited Britain's work in India on financial inclusion and developing the corporate bonds market in China as examples of such joint ventures.
Bischoff acknowledged that regulation of the sector, which has come in for major criticism for its light-touch approach "has to change".
"We believe that strong, high standard, regulation is actually good for a financial centre and we believe that London will benefit from that."
However, Treasury Minister Paul Myners said any regulation had to be proportionate to avoid extinguishing "the spark of innovation and creativity".
Bischoff stressed that Britain's financial services sector was not just about London, with nearly half the profits of the sector being generated outside the capital, and more than one million people employed by the industry in areas outside the southeast of the country.
In spite of heavy job losses in the sector and a reduction in tax revenues, Myners said he was confident these would "stabilise and we will see a recovery in due course".
The report, which outlines future strategies over the next 15 years, was broadly welcomed by business groups.
The Association of British Insurers (ABI) said it "should help ensure the current banking crisis does not taint the benefits of financial services to consumers or the UK economy". ($1 = 0.6597 pound) (Reporting by Frank Prenesti and Matt Falloon; editing by Stephen Nisbet)