Knowledge & Insight

Taking stock of the UK Financial Services sector

Fri 4 April 2014

The UK’s financial services (FS) sector plays a central role in determining our country’s overall economic success or failure. FS is not only a major employer and a source of huge tax revenues - by facilitating the free flow of capital, securely processing transactions and providing commercial and consumer credit, it indirectly underpins a large part of the UK’s infrastructure. And by linking the UK with global markets, FS supports and drives diverse domestic industries, not just City banking. So a return to long-term sustainable growth requires a strong FS sector, which in turn requires a regulatory framework that both manages risk and promotes efficiency and growth.

Financial Regulation – a tricky balancing act

One of the most significant risks to growth in FS is a tighter regulatory environment which could threaten competitiveness and drive business overseas. Yet a regulatory framework that is too relaxed presents no less a risk, so a balance must be struck to promote growth whilst protecting the interests of customers, investors and stakeholders. The importance of achieving this balance was highlighted in a recent PwC UK report called “Where next for UK financial services?” This insightful paper suggests that a well-functioning FS sector could deliver an additional £62bn to UK GDP by 2020, with a corresponding £40bn boost to household incomes. The figure also includes £23bn in exports, which would be critical to the UK balance of payments.

Financial Services – a UK-wide industry

The impact that a thriving City can have on the rest of the UK cannot be overestimated. Whilst no one would deny that London has most to gain from a successful FS industry, it is also true that FS plays a major role in the regional economies of many areas throughout the UK, particularly Scotland and the North West where many people are employed in retail banking, asset management and insurance. And although there has been a significant consolidation across regional building societies, the North retains several mutual societies that continue to perform well. The Midlands and the South West host back office operations for several major banks, and FS employment remains high in these areas. So it’s clear that a strong, healthy FS sector is critical not only to London, but to the UK as a whole.

An engine of growth

In addition to the provision of credit and the facilitation of trade, the direct mechanism that links FS to growth in other sectors is very straightforward. In areas where employment in the FS sector makes up a large proportion of total jobs, spending by FS employees is critical to the local economy. This suggests that a dissemination of operations from London to other regions would be good for the UK as a whole. Of course, that is not necessarily a driver of corporate strategy, and no one would suggest that regional economic growth should be the responsibility of banking executives. But relocating operations to regions where both commercial rents and wages are lower can deliver significant cost savings, which is certainly of interest to executives and their shareholders. Of course, it’s not unusual for a particular industry to become centralised in a particular area: ship building in Glasgow, steel production in Sheffield, heavy manufacturing in the Midlands are just a few examples. But no other industry has the same impact as FS, with the power to affect so many other sectors and households - which is why a well-functioning FS sector is so critical to the UK.

London’s development as the hub of the global financial services industry has been driven by a number of factors, not least of which is the UK’s political stability and the high quality of life that makes London such an attractive place to live. This has helped to attract the brightest talent from around the world, both at an operational level and at executive level, and talent in the boardroom is the final piece in the jigsaw that makes up a successful FS sector.

Financial services executive search

In today’s ferociously competitive FS sector, talented leadership is critical for any organisation, and recruitment and retention of leading talent requires the services of a specialised financial services executive search firm. Stone Executive is an experienced financial services executive recruitment firm with a strong track-record in financial services headhunting. Our financial services headhunters’ expertise spans capital markets, corporate finance, commercial & retail banking, insurance and asset & wealth management. And with a network that reaches across the UK and beyond, we are ideally placed to identify and attract high calibre executives with the vision to lead their companies through a changing global FS environment.

 

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