Experts say Scotland's finacial services are in rude health despite recession

by Feb 01, 2010 No Comments
The overall outlook for Scotland’s financial services is positive beyond expectation, say observers

Recession’s upsideScottish financial services firms have cut staff numbers so deeply that they don’t have sufficient headcount in the event that trading conditions improve significantly this year. It has prompted some companies to plan for a 10 per cent increase in staff.

The annual recruitment review by recruiters Joslin Rowe looks back on a turbulent year in Scotland’s financial sector, when job vacancies slid by 93 per cent on 2008 and 43 per cent of firms surveyed cut headcount. The research takes in responses from 68 financial services firms in Scotland, which together employ over 17,000 people.

It’s a markedly more optimistic outlook than this time last year, and suggests that 52 per cent of firms north of the border intend to add to their teams in 2010. This is not across the board, however – fund managers are most likely to bolster their ranks. To a lesser extent, investment operations and retails banks are set to recruit and this may be down to necessity; around half of respondents say they don’t have enough staff should conditions improve.

The 68 financial institutions, employing over 17,000 people in Scotland between them, contributed to research during November and December 2009, designed to gauge perceptions amongst some of the most influential employers in the sector. The majority of firms (73 per cent) described their company’s level of business confidence for 2010 as ‘optimistic’ or ‘very optimistic’ whilst 24 per cent had neutral feelings about the future. Importantly, just 3 per cent were pessimistic (compared with 19 per cent precredit crunch).

The annual study, which has run since 2000, was conducted by Joslin Rowe Scotland, the financial services recruitment specialist and supported by Scottish Enterprise and Scottish Financial Enterprise.

Margaret Dyer, Director, Joslin Rowe Scotland points out: “As recruiters for the financial services sector, we received a first hand insight into the fallout that followed first the credit crunch, and then the official recession. At one point, as our research reveals, job volumes in Scotland’s financial services sector were an incredible 93 per cent down on 2008 levels. Whilst there’s no doubt that there are now far more job opportunities in the market as we head into 2010, job seeker movement amongst talented professionals remains muted.

People are adopting a ‘better the devil you know’ career plan through fear of a double dip recession. The recession hangover means even firms with strong employer brands are struggling to entice the best recruits from their competitors.” Jim Watson, senior director, Financial Services, Scottish Enterprise says: “Regardless of the short term impacts of the current economic conditions, the industry requires a dynamic and skilled workforce that can support the transition currently taking place within the industry and ensure Scotland is well placed to capitalise on new opportunities when they emerge.

“The newly formed financial services Skills Gateway is an excellent example of the type of initiative that we all need to support if we are to develop this highly skilled workforce for the future. This type of collaborative approach is vital if we are to ensure Scotland can retain its international stature as one of the leading financial services locations in the world.” The main findings of the review are: 43 per cent of responding firms cut staff in 2009 and 10 per cent predict to make further cuts in 2010 due to offshoring and outsourcing, as well as redundancies. Up to 10 per cent of staff are expected to be effected.

Directors are most vulnerable.

January 2009 was the worst month for financial services recruitment – with job vacancies an incredible 93 per cent down on 2008 levels* Companies increased their flexible working provision to cut wage costs. The number of companies with a third of staff working shorter working weeks/days has risen from 11 per cent to 17 per cent 35 per cent of respondents experienced difficulties enticing staff from competitors as the labour market reduced substantially in 2009 through lack of confidence 13 per cent felt their employer brand had suffered since the credit crunch, making it harder to attract staff.

Nearly half our responding companies (47 per cent) said their current staffing levels are too lean to manage a significant upturn in 2010, 52 per cent of firms will be increasing permanent headcount (mostly fund managers but also investment and retail banks) The average salary rise in Scotland’s financial services industry is forecast to be 1-2 per cent in 2010 – after a year of no increases for most in 2009 Despite the recession, and the supposed amount of available talent flooding the market, 35 per cent of our respondents still experienced difficulties in recruiting staff during 2009 – ten percentage points higher than last year. In fact, nearly half, said their current staffing levels were too lean to manage a significant increase in business volumes. 13 per cent of financial services firms felt their employer brand had suffered since the credit crunch, making it harder to attract staff. Only 8 per cent of respondents indicated retention problems in 2009 – as employees opted for a ‘better the devil you know’ career plan.

Of those companies who did experience difficulty, team members and team leaders were cited as the hardest to retain. The average length of staff tenure was five years.

A number of organisations were forced into a rethink of their benefit provision because of the tighter economic climate. Flexible working was a popular scheme to initiate as firms turned to the cost savings that could be gained from a four day week. Bonuses too were re-examined and rejigged.

Jeremy Peat, Director of the David Hume Institute, commented: “Clearly 2009 was another annus horribilis for the Scottish financial sector. The highly respected and objective ITEM Club has estimated that output of the sector in Scotland will have declined by nigh on 7 per cent in that year – a truly massive figure. There is no doubt that employment will also have declined, disproportionally across the financial and business services sector in Scotland.

“The combination of the trauma that has devastated our two biggest companies with global and UK recession made this, worse than average hit, inevitable. HBOS and RBS have major ‘multiplier’ effects across the Scottish economy. Their decline will have been felt in many, diverse, areas; I have commented elsewhere on the shift to the south of the centre of gravity of these banks and the resulting adverse impact.

“We still await firm evidence that the UK has exited recession. Probably this happened as 2009 turned to 2010 but any recovery will be uncertain and sluggish. We must expect the pick-up in Scotland to be especially sluggish. Large parts of the financial sector here will be in the guard’s van of the recovery train. Nevertheless, recovery is the most likely prospect for this freezing New Year.

Further, recovery across the Scottish financial sector matters not only directly, so far as its contribution towards a return to output growth is concerned, but also indirectly. This sector is an engine of growth for most other components of our economy as well as being crucial in its own right.

“In this context, the information in this year’s review – again based upon bang upto- date data – is critical to our view of the outlook, and broadly encouraging. After such a tough couple of years it is remarkable that as many as 73 per cent of respondents are optimistic about the year ahead and an amazingly minute 3 per cent pessimistic.

“It is equally surprising – and encouraging – that just over half the respondents expect to increase their headcount this year, due to business growth no less. There are of course variations by scale of company and subsector, just as one would expect given where the worst adverse effects have been suffered.

Further, firms are increasing both contractor employment and out-sourcing, all consistent with enhancing flexibility in the face of uncertainty.

“But the overall story is positive beyond expectation, particularly given last year’s stories of downsizing. Employees are staying put in most instances, no doubt fearing the risks of changing jobs while the environment is so uncertain. This has hampered recruitment efforts, but continuing recruitment difficulties signal that companies are maintaining standards and seeking out quality at all costs. That is critical if the sector is to compete on quality in the international marketplace.

“As we progress through the year, I very much hope that the findings of this review come to fruition and look forward to the continuation of a strong, self-confident and internationally competitive Scottish financial services sector. This will be less dependent upon two major players than was the sector of old. But that change should be seen as potentially positive, making the sector more diverse, robust and flexible; and opening up many new opportunities for people starting up the career ladder.”

Will Peakin Will Peakin

Beginning as a reporter on weekly newspapers in the North-East of England, Will moved to Glasgow and worked as a freelance for a number of UK national newspapers. In 1990 he was appointed News Editor of Scotland on Sunday and in 1995, Scotland Editor of The Sunday Times. In 1999, he and his family moved to the south-west of France where he wrote for The Sunday Times Magazine. Returning to Scotland in 2002, he was Assistant Editor (Features) and Deputy Editor at The Scotsman before joining Holyrood Magazine in 2004. He writes for the magazine's business pages and edits its series of...

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