A Confederation of British Industry (CBI) quarterly survey of the financial services (FS) sector, sponsored by PwC, shows that UK jobs in the FS sector grew at their fastest pace since 2007 during Q413, with an increase of 10,000 in the fourth quarter of last year. A further rise of 15,000 is expected in Q114, according to comments at the press conference attended by bobsguide’s Neil Ainger, and many of these will be tech jobs in the operational and compliance/risk fields.
Optimism in the UK FS sector rose at its fastest rate since the CBI/PwC survey began back in 1989, and financial services' profitability rose for the fifth consecutive quarter, strengthening the rosy jobs outlook.
The CBI/PwC Financial Services Survey estimates that employment in the UK FS sector will reach 1.16m by the end of this quarter, although the sector is still 52,000 jobs shy of its previous peak at the end of 2008 – but headcounts started falling quickly after this following the collapse of Lehman Brothers’ and the full onset of the financial crisis.
UK FS Firms’ capital spending intentions for the next 12 months are positive across all categories, including banking, insurance and asset management, for the first time since the 2008 financial crisis.
Companies are much less concerned about the impact of regulation and demand on FS businesses’ in the year ahead and more mindful of skills shortages instead, says the survey. This suggests a grudging acceptance of the impending European Market Infrastructure Regulation (EMIR) and other post-crash rules such as the Basel III capital adequacy regime, Solvency II insurance regime, and the UK Vickers' report ring-fencing measures – not to mention other supra-national requirements such as the EU banking reforms and measures to end the ‘too big to fail’ problem, which will all impact UK institutions. The recently announced plans of the UK opposition leader, Ed Miliband, revealed the same day as the press conference last week, to sell off more UK branches in order to create two big new challenger banks in the UK as a potenital way to improve retail banking competition, are perhaps not yet so accepted by UK FS firms (as the belated project verde and rainbow divestments from Lloyds Bank and RBS are intended to assist competition in this area anyway).
While the regulatory burden cannot be ignored – it is an issue that will certainly drive an uptick in FS compliance and technology jobs related to monitoring, risk and reporting systems – the fact that new rules such as those outlined above are now coming into effect has been accepted by the industry which is now moving forward. The focus is now turning to how to deliver the desired ‘new normal’ regulatory regime and to finding the necessary staff to implement it, as well as ensuring that FS IT systems and infrastructures have the technical capacity and connectivity to deal with new challenges from non-traditional tech-based players and enhanced competition and reporting requirements. No repetition of the outages at RBS, Barclays and other UK banks last year can be permitted if they are to successfully fight off competition from newcomers such as Virgin, Metro Bank and others, which is no doubt another contributing factor to the rise in tech jobs, as firms battle to improve their customer service provision.
“Compliance skills are probably the hottest asset you can have in the City job market at the moment, and the same goes for the global FS picture,” said Kevin Burrowes, PwC UK financial services leader, at the press conference in London, while admitting that the ‘conduct agenda’, which covers how FIs sell to and treat customers fairly, after numerous mis-selling scandals from PPI to Libor, is also a contributory factor to the job demand. “Lots of jobs from outside the sector also rely on FS, with 250,000 IT jobs reliant on the sector [including those not directly employed but undertaking contractual development or services delivery work].”
In response to a question about if FIs are turning to outsourced IT in the cloud as a way of coping with the increased operational cost of the stricter, more expensive ‘new normal’ regulatory regime, Burrowes said that it was hard to put an exact jobs number to this supposition and warned that banks shouldn’t go too far down this route anyway. “Some things can be outsourced, but others must remain. A core IT competency should be retained in-house to ensure IT resiliency, consistent customer service, and a secure environment against cyber-attacks.”
It was a viewpoint that Matthew Fell, CBI director for competitive markets agreed with, pointing out that: “As the customer-centric approach grows you need to keep some technical knowledge in-house in order to fight off newcomer challenger banks and ensure consistency of delivery. This is why you are seeing money dropping down from compliance projects into IT projects, to stabilise customer service architectures and offerings.”
Improving FS Jobs Picture
“As the recovery takes root in the wider UK economy, it is beginning to feed through to financial services firms [and various different jobs],” said the CBI’s Fell. “Things are starting to look more ‘normal’ after five years of volatility. All the key indicators – optimism, business volumes and profitability – are up. But it’s particularly encouraging to see longer-term confidence indicators like marketing spend, employment and investment spend also rising strongly.
“It is telling that financial services firms are now less worried by levels of demand and regulation and are instead concerned about a skills crunch, their systems capacity and stronger competition.”
PwC’s Burrowes also added a plea that as public trust is earned and rebuilt over time, banks will increasingly be recognised positively for their role in society and their contribution to the UK economy generally. “The survey also suggests that the sector is beginning to get to grips with its regulatory agenda. Regulation is seen as a lesser obstacle to growth than before, and regulatory spending is growing more slowly [but still growing]. There is no question that compliance remains a major concern, but it is slightly less all-consuming than it was.”
Sector-specific exceptions do remain, however, with Jonathan Howe, PwC’s UK insurance leader commenting at the London press conference that insurers had stood up better than banks to the financial and regulatory challenges of the 2008 crash, but that they now did need to focus more tightly on compliance and regulation. “The 1 January 2016 start date for the Solvency II regime is the key regulatory date for insurers, with the conduct agenda another crucial issue for the insurance sector.”
“Insurers will invest in technology in the year ahead to gain more efficiency,” added PwC’s Howe. “Insurers have lots of legacy and aging siloed systems that need replacing as part of their drive to attract new customers, comply with new regulations, and improve multi-channel service provision.”
Conclusions: Key FS Survey Findings
The key findings of the CBI/PwC Financial Services Survey, which questioned 87 senior figures from across UK financial services, were as follows (click on the highlighted text for the full report):
• 69% of financial services firms said they felt more optimistic about the overall UK business situation, while 1% said they were less optimistic, giving a balance of +68% – the highest since the CBI/PwC FS survey began back in 1989.
• 53% of firms said that business volumes were up, while 7% said they were down; giving a balance of +46% – the highest since June 2007 (+51%).
• Looking ahead to the next quarter, 52% of companies expect business volumes to increase, while 2% said they will decrease, giving a balance of +50% – which is the highest since June 2010 (+63%).
–– To see more results from the CBI/PwC FS Survey please click on the highlighted link or see the infographic below: To see last week's World Economic Forum (WEF) Global Risks 2014 report, identifying unemployment, income disparity, weather disasters and cyber-attacks as the key risks for the year ahead, please click on the highlighted text.