MORE than a quarter of a million jobs could be created if the British financial services industry broke free from the dead hand of over-regulation, a report out today forecasts.
Accountancy giant PricewaterhouseCoopers (PwC) said its latest study showed that the pivotal position of financial services in the wider economy could potentially create 265,500 private sector jobs – about 7,300 of them in Scotland.
PwC said “sustainable and well-regulated” growth in the sector could also contribute an extra £50 billion to the wider economy by 2020, helping push gross domestic product 2 to 3 per cent higher.
The report predicted that with advantageous economic and regulatory conditions, 218,000 private sector jobs could be created in the wider UK economy, and about 47,000 in the financial industry itself over the next seven years.
However, under a second, more negative scenario, the findings say that if the sector is held back by regulatory burdens and a weak global backdrop, it may only contribute an extra £9bn to Britain’s recovery and create 12,000 jobs.
Lindsay Hayward, financial services tax partner at PwC in Scotland, said it was “important to acknowledge” the positive impact trust in the financial services sector could have on the economy.
“There is no doubt we need to reflect on the lessons learned following the credit crunch and do our utmost to limit the likelihood of future crises,” Hayward said.
“However, better regulation doesn’t necessarily mean more regulation and we perhaps need to see a bit of re-balancing in order to help unlock the industry’s potential in a sustainable and stable way.”
She added that among signs of renewed optimism in the financial sector were “the emergence of start-up banks in Glasgow and Edinburgh and steady growth in areas where we are world-class – such as contact centres, technological innovation and asset management”.
Scotland has £750bn of funds under management.
However, in the report Where next? Assessing the Current and Future Contribution of the UK Financial Services Sector, Kevin Burrowes, UK financial services leader at PwC, claimed the regulatory crackdown in the wake of the 2008 crisis was in some cases harming competition.
He said: “Many aspects of financial services reform are currently constraining the advice and products financial services institutions can offer to customers, making competition improvement in the sector difficult to achieve.”
The research suggests the finance sector could create jobs across a raft of UK regions and industries, including manufacturing, restaurants and leisure, retail, transport and construction.
Financial services firms provide credit and products, while the sector also buys a substantial amount of goods and services from other parts of the economy – worth around £90bn in 2010, according to PwC.
The sector contributes 10 per cent of UK GDP and £1 in every £10 of tax paid.
The report paints a somewhat different picture to that put forward by Lord Turner – former chairman of the defunct Financial Services Authority – when at the time of the financial crisis he branded many financial services’ activities as “socially useless”.