Scotland 'must have key role in financial sector'

Published on Sunday 29 March 2009 21:47

SCOTLAND should play a major role in any future regeneration of the UK's financial services industry, a top accountancy firm has urged, as new figures revealed that jobs in the sector are being slashed at the fastest rate since 1993.

Describing trading conditions as "exceptionally tough", business lobby group CBI and accountant PricewaterhouseCoopers said the number of people employed in financial services fell dramatically in the three months to early March.

Lindsay Gardiner, head of financial services in Scotland at PWC, warned that the UK needed to ensure it is not too "London-centric" when it rebuilds its hard-hit financial services sector.

She said: "When considering the reshaped future of financial services, I strongly believe that it is crucial the UK doesn't just focus on one, London-centric financial centre.

"Historically, Scotland's financial services community built up a great reputation for trust, prudence and probity, backed by a very strong pool of talented people and it has an important role to play in shaping the future of the sector in the UK."

The report, published today, showed that staff turnover fell for the fourth quarter in a row due to nervousness about switching jobs and a shortage of vacancies.

But Gardiner added that there were some "very early signs" of recovery in the Scottish financial services industry, with investment management companies reporting the return of both instututional and retail investors.

She said that Scotland's financial services call centre and back-office service sector, which is lower cost than in the south-east of England, is also experiencing some recruitment – in contrast to the rest of the sector.

She said: "Whilst recognising conditions are still tough and that many hurdles still have to be overcome as we work our way out of this recession, some players are beginning to comment on very early signs of recovery, particularly within the investment management community."

The UK-wide jobs cull in the industry came as the survey revealed a sixth successive heavy quarterly decline in business volumes, with only 9 per cent of financial services firms saying volumes had risen and 56 per cent reporting a drop. The CBI also reported steep falls in profitability, while investment plans have been scaled back.

Among major job reduction announcements in the period, Royal Bank of Scotland announced it planned to cull 2,300 jobs while RSA Insurance said it would axe 1,200 UK jobs by the middle of next year.

In January, Barclays slashed 2,130 positions in investment banking and investment management, while it also said it was in consultation over a further 2,100 cuts in retail, commercial banking and credit card divisions.

Ian McCafferty, CBI chief economic adviser, said: "Conditions remain exceptionally tough in the financial services sector, and have not been helped by equity markets having fallen further since our last survey in December.

"Sharp drops in revenues and profitability are causing continued suffering, while business volumes remain very weak.

"Firms are making heavy cuts to staff numbers and investment plans to make savings and reflect weak demand."

The CBI survey showed income from areas such as fees and investments dropping at the fastest level since the quarterly survey began in December 1989.

A balance of 47 per cent of firms registered a decline in profitability, although this was slightly better than December's 55 per cent drop.

Business confidence continued to dwindle, with the number of firms less optimistic about the financial services sector since December outnumbering those were more positive by a balance of 34 per cent.