- Banking is for individuals and businesses to manage their money, access loans, buy property, exchange currencies and many other activities. It is organised at into three core categories: Retail; Corporate; and Wholesale banking.
- Investments is about managing and growing the wealth of individuals and organisations.
- Insurance – covers a huge variety of risks, from cars and houses to ships, planes and satellites. For example, those working in the world’s trouble spots need kidnap and ransom cover, oil pipelines need terrorism cover and music promoters insure against the non appearance of the leading act.
- Credit, leasing and finance refers to organisations that offer individuals and companies credit to purchase or lease products.
- Financial Advice is about working with people to plan their financial goals, based on their current situation and looking at the best ways they can achieve their financial objectives, such as helping someone to choose a mortgage, invest their savings or plan for their retirement.
More than 1.07 million staff in 34,000 workplaces constitute the UK’s financial services sector, from online car insurers to retail banking giants, and from self-employed independent financial advisors (IFAs) to global investment banks. Operating under a regulatory framework unique to the UK, the sector facilitates the allocation of capital, promotes confidence and continuity in life and business by managing risk and maintains the transaction systems that the rest of the economy relies on to conduct its business.
However, the sector has been hit hardest by the current recession. It is anticipated that the severe contraction in investment banking activities and the nationalisation and merger of several financial institutions across the UK will cause widespread job losses. There are concerns that in the long term, the UK financial services industry could witness a structural decline, at least in relation to its contribution to the UK GDP.
Sources: FSSC LMI report 2009, Alliance of Sector Skills Councils report 2009, EU KLEMS database 2008, ONS The Pink Book 2007, FSSC The Skills Bill: Analysis of Skills Needs in UK Financial Services 2007, FSSC UK Financial Services: Five Years Forward 2006 and ONS Change to contribution by industry to gross value added between 1992 and 2004
The sector employs some 1.2 million employees, 4% of the UK workforce, and produces more than 8% of the country's Gross Domestic Product (GDP). Banking accounts for 61% of employment, while insurance accounts for only 7% and auxiliary services for 32% of the workforce.
Since 2000, and despite strong output growth, employment growth in UK financial services has been weak when compared with other countries, notably the US. This is due to strong productivity gains, which the sector has achieved through increased efficiency. The UK financial services have been hit by the economic downturn of 2008, which looks likely to continue into 2010. As a result there have been notable declines in employment numbers. However, accountancy and finance have been affected less. Recent job losses in the UK financial sector have risen from around 10,000 to 16,000 in the first quarter of this year. An estimated 10,000 staff were made redundant from high street banks and other lenders between October and December 2008. In December 2008, job appointments and vacancies reportedly fell to their lowest level for more than a decade. Staff turnover has also declined, as fewer vacancies and concerns about the recession may be deterring people from changing jobs.
Sources: FSSC LMI report 2009, FSSC website 2009, Alliance of Sector Skills Councils report 2009, London Market Skills Review 2008 and FSSC The Skills Bill: Analysis of Skills Needs in UK Financial Services 2007
There are approximately 9,600 VAT registered financial services firms in the UK, operating more than 34,000 establishments. The majority of firms (97%) are small or medium-sized (SMEs), including nearly 50,000 self-employed individuals. Employment, however, is dominated by a handful of large employers, most notably the high street retail banks.
Sources: FSSC The Skills Bill: Analysis of Skills Needs in UK Financial Services 2007 and ONS UK Business: Activity, Size and Location 2007
In 2007, some 7% of all financial services staff were not considered proficient at their roles. However, 83% of all employers felt the need to improve skills among their employees. Employers’ concerns were mostly centered on the soft skills, attitude and commitment that complement technical knowledge to deliver value.
The current economic climate means that there are substantial changes in the availability of skills within the labour market, which has an impact upon employers ability to recruit to certain posts.
Source: FSSC LMI report 2009, FSSC The Skills Bill: Analysis of Skills Needs in UK Financial Service 2007
Currently, many employers are still recruiting and there are openings for the talented professional. It is reported that over half of the employers are finding it as difficult as it was one year ago to hire the right person for the vacancy. Despite the current economic climate, only 24% of finance departments have been asked to freeze their recruitment programmes for 2009.
Before the economic downturn, the incidence of vacancies was low relative to total employment partly because the sector had a relatively small percentage of part-time and temporary workers, but also because productivity gains enabled employers to increase output without corresponding increases in headcount. Almost one fifth of all job openings across the UK were proving hard-to-fill. Moreover, 12% of all vacancies could not be filled due to skills shortages.
Demand for financial services workers is cyclical and the labour market cannot always keep up, but there is also a widespread perception that the talent pool is not growing nearly fast enough. This shortage increases competition among employers, many of whom prefer to poach staff rather than develop their own. The result is steep increases in earnings and incentive pay.
Sources: Alliance of Sector Skills Councils report 2009, Jobcentre Plus statistics 2007 and FSSC Employer Skills Survey 2006
Financial services recruitment is not seasonal, but vacancies do tend to peak in February, as institutions assess their needs and weigh the viability of their headcounts for the new fiscal year.
A lack of skilled or experienced applicants is the most often cited reason for recruitment difficulties, while a lack of applicants in general and competition from other firms and industries add to the pressure felt by employers.
In terms of occupations, recruiting professionals and technical staff is the biggest challenge faced by employers. These employees are central to product and service development, but obtaining their expertise is neither easy nor cheap. Not only are competent specialists few in number, but the demand for their services also tend to rise faster than demand for the industry’s services. The result is widespread employee poaching as employers court key staff with varying incentives, and those who cannot commit sufficient resources to recruitment and retention suffer persistent shortages. A similar pattern occurs in the recruitment of managers.
Sales and customer service recruiting is also problematic. Turnover among these occupations is very high and the sector’s extensive use of outsourcing and offshoring is making many skilled individuals wary of entering what they believe to be transient roles and an uncertain, unrewarding line of work.
Sources: FSSC The Skills Bill: Analysis of Skills Needs in UK Financial Services 2007
It is not currently possible to provide accurate information regarding the forecasting of the changes that will occur in the financial services labour market due to the current economic conditions. However, key challenges for the sector include:
- the needs to source better skilled staff at entry level – to grow the pool of talent
- new entry routes into the industry and career paths for the existing workforce will need to be provided through occupational standards, professional qualifications and engagement with training providers
- new resources will need to be created to communicate opportunities in the sector
- need to support existing initiatives in schools/colleges to promote financial capability
- new entrants will need a higher standard of work-readiness should be delivered by the educational system to ensure that are more employable
- the need to maintain commitment to the wider development needs of workforce
- create routes for non-regulatory and soft skills training that are as practical and compelling as their regulatory counterparts
- need to develop more and better managers and leaders to address managerial skills gaps and poor leadership
- increase awareness of the importance to invest in skills
Source: FSSC LMI report 2009 and FSSC The Skills Bill: England 2008