Continued success
By any measure, Scotland is enjoying outstanding success as a financial services centre: Aberdeen Asset Management, HBOS, RBS and Standard Life all have their global headquarters here; half of the world's top 10 banks have substantial operations across Scotland; and international firms such as Alliance Trust, Aviva and BNP Paribas are supported by their operations in Dundee and Perth. Added to this, over the past year, major Scottish and international companies have significantly increased their operations or invested in Scotland including Alliance Trust, moneyQuest, ACE Insurance, Barclays Wealth Management, First Data International and JP Morgan. Industry surveys bear this success out, with the SFE Quarterly Survey of Scotland's Financial Services Industry, sponsored by Capgemini, for Quarter 4 of 2006 showing that a majority of responding companies increased business levels for every quarter in 2006. Future prospects are also positive with nearly two-thirds of businesses anticipating improved confidence for the year ahead.
Summary
Scotland's financial services industry is one of the fastest growing sectors of the Scottish economy and the summary chart shows it performing strongly against UK benchmarks. Figures 1 to 5 provide the detail set out in the summary chart.
Contribution to the economy
The financial services industry in Scotland now contributes around £7 billion (7%) to Scottish Gross Domestic Product ( GDP)1. Since the start of 2000 the financial services industry in Scotland has grown by 55% while the overall Scottish economy grew by 13%. In the same period, the UK financial services industry grew by 44%.
More recently, the industry in Scotland grew by 7% in the year to 2006Q3, in line with the UK financial services industry and three times faster than the wider Scottish economy, which grew by 2.3%.
FIGURE 1: GDP Performance in Financial Services 1998-2006Q3
1GDP is measured as Gross Value Added ( GVA)
Employment
Employment in Scotland's financial services industry stood at just over 108,000 in 2005 (latest available data), indicating a small decline on the previous year. Over the same period, employment in the UK financial services industry also decreased.
Figure 2 illustrates Scotland's share of financial services employment in Great Britain for each industry sub-sector. Since 2000, Scotland's share of financial services employment in Britain has risen from 8.8% to over 10%.
FIGURE 2: FINANCIAL SERVICES EMPLOYMENT IN SCOTLAND RELATIVE TO GREAT BRITAIN BY SUB-SECTOR, 2000 - 2005
In addition to employing 108,000 people directly the financial services industry in Scotland also supports indirect employment of around 90,000 in other industries. Including other effects, the financial services industry accounts for around 9% or almost one in ten Scottish jobs.
Figure 3 shows absolute employment levels during the period 2000 to 2005. Employment varied across the individual sectors of the industry as follows2:
- Banking increased by 34% to 65,100
- Life and Pensions fell by 19% to 15,600, mainly due to restructuring3
- General Insurance fell by 14% to 6,600, while maintaining its UK share
- Asset Management rose by 12% to 11,100
- Intermediation saw an increase of 20% to 9,700
FIGURE 3: FINANCIAL SERVICES EMPLOYMENT IN SCOTLAND BY SUB-SECTOR, 2000 - 2005
2 Banking - SIC codes 65.11, 65.12, 65.21, 65.22; Life & Pensions - SIC codes 66.01, 66.02; General Insurance - SIC code 66.03; Asset management & Securities Broking - SIC codes 65.23, 67.11, 67.12, 67.13; Intermediation (the activities of IFAs and insurance agents & brokers) - SIC code 67.20.
3 The Joslin Rowe Scottish Financial Services Recruitment Review 2007
Earnings
Between 2005 and 2006, full-time median4 financial services earnings in Scotland rose by 7.5% to £26,400. During this period median earnings in the rest of Britain's financial services industry increased by 2% and earnings in the wider Scottish economy grew by 5%.
FIGURE 4: MEDIAN EARNINGS BY OCCUPATIONAL STRUCTURE 2006
Occupational Structure | Scotland Financial Services | Scotland - All Sectors | GB Financial Services | GB - All Sectors |
|---|
% of sector | Earnings | % of sector | Earnings | % of sector | Earnings | % of sector | Earnings |
|---|
Managers and Senior Officials | 31% | 42,000 | 13% | 32,900 | 34% | 48,800 | 16% | 35,000 |
|---|
Associate Professional and Technical | 13% | 27,000 | 15% | 26,100 | 16% | 33,200 | 15% | 26,900 |
|---|
Administrative and Secretarial and Sales and Customer Service | 46% | 17,600 | 21% | 16,200 | 40% | 18,300 | 21% | 16,900 |
|---|
Other* | 9% | 32,100 | 51% | 21,600 | 9% | 38,400 | 48% | 22,200 |
|---|
Total | 100% | 26,400 | 100% | 22,600 | 100% | 30,800 | 100% | 23,700 |
|---|
*Other includes a wide range of occupations, and in financial services, includes professional occupations such as actuaries and economists.
Source: Annual Survey of Hours and Earnings 2006
Qualifications
The quality of the workforce within Scotland's financial services industry also continues to increase. The industry has a higher proportion of University-educated workers than either the Scottish or UK economies as a whole. The proportion of workers with degree-level education or above has risen from 19% in 2000 to approximately 27% in 2006. The Joslin Rowe Scottish Financial Services Recruitment Review 2007 noted that the concept of "growing your own" key staff continued to form an important element of recruitment strategy with 60% of organisations sampled expecting to operate specific graduate recruitment and 40% school-leaver recruitment in 2007.
FIGURE 5: QUALIFICATIONS 2006
Qualification | Scotland Financial Services | UK Financial Services | Scotland - All Sectors | UK - All Sectors |
|---|
Number | % of sector | Number | % of sector | % of sector | % of sector |
|---|
Above SVQ 4 - Degree or Higher | 33,000 | 27% | 343,000 | 28% | 21% | 22% |
|---|
SVQ 4 - Higher Education below degree | 18,000 | 14% | 76,000 | 6% | 15% | 10% |
|---|
SVQ 3 - A level or Equivalent | 44,000 | 36% | 338,000 | 28% | 30% | 24% |
|---|
SVQ 2 GCSE A-C or Equivalent | 22,000 | 18% | 356,000 | 29% | 17% | 23% |
|---|
SVQ 1 and below* | 7,000 | 6% | 108,000 | 9% | 18% | 21% |
|---|
Total | 124,000** | 100% | 1,222,000 | 100% | 100% | 100% |
|---|
* This includes those with SVQ level 1 qualifications, other qualifications and no qualifications. Those with unknown qualifications have been removed from the analysis. Estimates are rounded to the nearest thousand. Workforce includes all those over 16 and in employment.
** LFS data is based on individuals' perceptions of the industry they work in. ABI is the preferred measure of industry employment as it is based on an employer survey.
Source: Labour Force Survey 2006 Spring Quarter
4 Median earnings are the midpoint of the earnings distribution. This is a preferred to average earnings as the latter can be skewed by a small number of high earners.
International benchmarking
It is essential that Scotland's financial services industry - and the success of the Strategy - is measured against international comparators. As was reported in the 2006 Annual Report, the strength of Scotland's financial services industry is monitored using a range of indicators that were developed by FiSAB and FiSIG. One of these measures indicates that in 2005, the industry's exports to foreign countries were valued at over £1.1 billion. This represents 6% of total Scottish exports, and almost 23% of total Scottish services exports. Additional measures are set out in figures 6 and 7.
The industry's current performance and the change in its performance against a number of comparators is summarised in figure 6. This extends the analysis presented in the 2006 Annual Report by including a larger number of international comparators plus comparisons with other UK regions. Figure 7 provides further indicators of how the wider economic environment in Scotland compares to other industrialised economies. Comparator locations are OECD members and include major economies such as the USA, Japan and Germany. Since 2000, Scotland has improved its international ranking across the range of measures.
FIGURE 6: FINANCIAL SERVICES BENCHMARKING
FIGURE 7: SCOTLAND'S GENERAL BUSINESS ENVIRONMENT BENCHMARKING
Notes and Sources:
Employment: ABI Employee Analysis and OECD Employment by activities and status. GVA: ONS Regional Accounts and Eurostat National Accounts. Exports: ABI Employee Analysis, Global Connections Survey, OECD Statistics on International Trade in Services Volume 1 and OECD Employment by activities and status. Export growth is over the period 2002-2003. Scottish Exports include sales to the rest of the UK. Exports at the sectoral level are not available for other UK regions. Earnings: ONS Annual Survey of Hours and Earnings and Eurostat Labour Cost database. International data is for 2005, regional comparisons are for 2006. GDP per Head: OECD (2006) OECD Statistical Compendium, ONS Regional Accounts. Productivity: OECD (2005) International Comparisons of Labour Productivity Levels and ONS (2006) Productivity First Quarter 2006. Change in position is from 1999. Entrepreneurial Activity: Global Entrepreneurship Monitor ( GEM). The GEM identifies the proportion of working age adults who are either setting up or have been running a business for less than 42 months. Graduates: Labour Force survey and OECD, Education at a Glance, Change in position is from 1999. Net Migration: OECD (2006) OECD Factbook, GROS Mid-year estimates.