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Scotland outpaces London

Finance sector growth ‘should not be taken for granted’

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Standard Life House, now home to Phoenix insurance


 

Output from financial and related professional services in Scotland is outgrowing London and the south east, but the sector’s strength across the UK ‘should not be taken for granted’, according to a new report.

It calls for more collaboration between the industry, policy makers and regulators, as well as a greater focus on specialist areas such as fintech, cybersecurity and data innovation to head off global competition.

In its report ‘Enabling growth across the UK 2019’, industry support group TheCityUK says the contribution of financial and professional services has grown in every UK region and nation over the past decade.

The sector’s gross value added in Scotland was up by 2% (£256m) between 2016 and 2017. This compares to slower growth in London (up 1.6% or £1.347 billion) and the South East (up 0.8% or £160m) in the same period. The growth in output came at a cost in jobs with the number of workers in Scotland falling 3.8% from 158,000 to 152,000. Employment i London and the south-east fell by 1.3% and 11.4% respectively.

As one of Europe’s leading financial centres and the second largest international financial hub in the UK, Scotland’s banking tradition has enabled all financial services businesses to flourish. It is rapidly becoming a global leader in FinTech and is well positioned to capitalise on its data-driven innovation.

However, the report says that to maintain its status the sector needs appropriate support and it outlines 15 policy recommendations to future-proof the UK’s competitiveness in the global financial market. These include greater collaboration between government agencies, firms, academia and regulators to meet the challenge of overseas competition and taking advantage of local decision-making through devolved government in order to boost productivity.

It says the UK should develop specialist centres in new digital areas such as cybersecurity and FinTech, and develop centres of excellence in technologies that will transform financial and related professional services, and wider business operations, such as robotics and artificial intelligence.




For the regulatory framework to evolve in response to the changing nature of financial and related professional services and the regionalisation of services provision, the report says regulators should explore the potential of a more regional approach.

On Brexi, the report says it “is vital that the UK creates a flexible and dynamic immigration system which enables access to international talent and for all parts of the UK’s ecosystem to thrive, regardless of location.”

It adds: “While bilateral agreements between the UK and other jurisdictions will be key to achieving this goal, it is crucial the UK unilaterally and immediately reforms and enhances the system currently in place and eliminates unintended regional biases.”

See also: Aviva cuts 1,800 jobs and splits ‘to crack complexity’

Miles Celic, chief executive of TheCityUK, said: “This industry is vital for job creation and driving economic output to all parts of the UK, as well as contributing billions in tax revenue. London is central to the UK’s strong position, but it is clear that the many thriving regional and national centres are an essential part of its success – Scotland playing a critical role.

“But, this should not be taken for granted. Ensuring the industry’s future as a national asset will require a concerted effort. This includes more regionally focused policies and initiatives, greater focus on developing specialist centres and sectors, a more competitive business environment and enhanced engagement between government and industry.”

Graeme JonesGraeme Jones, pictured, chief executive of Scottish Financial Enterprise, said: “The increased pace of growth delivered by Scotland’s financial services industry demonstrates the continued strength of our sophisticated ecosystem here. Our legacy of success stretches back hundreds of years and is something we are determined to continue through committed, collaborative engagement within our industry and with both governments. 

“With particular reference to skills and talent, great strides have already been taken to create and support more opportunities and routes into financial services for people from diverse backgrounds, from all corners of Scotland. While our strong track record of innovation, our technical expertise and access to highly talented individuals also stand us in very good stead during a time of significant technological change.”

Almost 2.3 million people work in financial and related professional services across the UK, with around two thirds of those employed in the industry working outside London.

The contribution of the financial and related professional services industry to Scotland: 

City Town

Financial and related professional services employment

% of City / Town employment

Financial and related professional services GVA (£m)

% of City / Town GVA

Edinburgh

49,685

14.92

5,728

25.2

Glasgow

39,270

9.33

2,387

12.2

Fife

7,435

5.20

534

6.0

Aberdeen

7,295

4.17

829

6.3

Regional Total

152,000

5.87

13,003

9.4

 



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