City of London Economic Research

International financial services: opportunities for emerging markets and the UK

 

By Karen Hindson, Researcher in the City of London Research Team

 

In their recent report, the World Bank discussed the value of openness to competitive international financial sector in contributing to faster growth and giving households and business around the world access to financial services. In this blog post we discuss how investment in emerging markets also represents significant opportunities for UK financial services.

Openness to international financial services is key for emerging markets

International banks represent an important source of finance, constituting between 40–60 percent of the banking industry in many developing regions[i]. Domestically, the competitive pressure provided by international financial services can promote market penetration - improving access to finance for SMEs and households that have historically been excluded. They also facilitate exchange of skills and new technologies, and invest in R&D to bring novel products and ways of working to improve efficiency and market access.

More widely, international finance also plays an important role in bringing much-needed capital and longer-term investment; stimulating foreign direct investment and international trade flows, and transmitting liquidity to local financial systems via cross-border bank flows. Despite a sharp decline after the global financial crisis, international Foreign Direct Investment inflows to developing countries have since recovered (see fig), and bank lending continues to be an important source of funding for emerging markets, enabling infrastructure investment, and stimulating business and job growth.  

 

 

More than ever, remaining open to international financial services is key to ensuring developing countries continue to benefit from global flows of funds, risk-sharing and diversification, and knowledge and skills transfer.

Emerging markets are also a source of opportunities for UK financial services

By 2030, over half a billion Africans[ii] and a billion people in Asia[iii] are projected to be middle class, representing a significant future demand for banking and financial services abroad. This is one of the key trends highlighted in The City of London Corporation’s Asia Next Decade Campaign, which emphasises the wider opportunities for UK financial and related professional services in Asia across the next ten years.

Fintech is rapidly expanding in emerging markets, where it also represents valuable opportunities to meet a growing demand for innovative financial products, both for fintech firms as well as traditional financial services. Fintech is helping to drive forward a crucial evolution in financial services, particularly in emerging markets, where it is reducing the cost and improving the ease of conducting financial transactions. Technology is facilitating a movement away from traditional ‘bricks and mortar’ banking, and establishing access to financial services via mobile phones for many rural and remote communities – giving previously under-banked households and SMEs access to financial services. As our report ‘The Value of Fintech’ highlights, London’s role as a leading global fintech hub makes UK Financial Services well placed to capitalise on this growing market.

The World Bank’s research speaks to the clear mutual benefits that international finance can bring. For emerging markets, it can play a crucial role in improving access to finance – promote entrepreneurship and act as an accelerator for economic growth. Where international financial services are dynamic and respond to the enormous commercial opportunities that emerging markets provide, this can strengthen global relationships, and help to secure a shared prosperous future.

 

[i] http://www.worldbank.org/en/publication/gfdr

[ii] https://www2.deloitte.com/content/dam/Deloitte/ng/Documents/consumer-business/the-deloitte-consumer-review-africa-a-21st-century-view.pdf

[iii] http://oecdobserver.org/news/fullstory.php/aid/3681/An_emerging_middle_class.html

 

Financial Services careers in London – a breakdown of jobs by occupation

 

By Katharina Ehrhart, Researcher in the City of London Research Team

 

In this blog we are interested in the occupations that are predominantly located in London and the City. We want to know what attracts highly skilled workers to this location. It is often said that people chose London because of the career opportunities it offers, and we will look at whether the data confirms this. Our focus will be on financial services (FS).

Highly skilled jobs in London

London has a working population of over 5 million and a significant number of senior positions - 58% of all jobs in London are high-skilled, and in the City this share rises to 68%. Across Great Britain, 45% of all jobs are high-skilled. The Office for National Statistics (ONS) defines high-skilled as occupations that require degree-level education or a high-level vocational qualification[1]. Below is a breakdown of jobs across sectors in London and in GB into high, medium and low-skilled roles.

 

There is a ‘sorting effect’ which means jobs in London overall are more senior than elsewhere. This is even more true for industries that rely on highly skilled workers, and trading with other businesses, e.g. knowledge-intensive business services. It is in these types of firms that more of the jobs in London are ‘top level’ and financial services are a great example for this. Below we can see a breakdown of jobs in and outside of London along the major occupation groups (Fig 2).

Highly skilled jobs in the FS sector

 

Together the three high-skilled occupation groups (highlighted in purple) account for just over 80% of FS employment in London. Outside London, they also represent a majority of jobs at just under 60% of employment. However, Administrative Occupations, a medium-skilled occupation which has the second-highest share of total employment outside London (at 30.1%), is less present in London.

Top 5 FS occupations in the City

By digging deeper into data from the economic modelling service EMSI, we can identify what this means for businesses, by the types of FS jobs located in the City[2]. Clearly these are mostly high-skilled positions but also include medium-skilled positions such as Bank and Post Office Clerks. Below we can see the top five FS occupations in the City.

 

 

The ONS and EMSI data used above demonstrate the wealth of high-skilled employment opportunities present in London and the City. Previous City of London research showed that City professionals choose to work in London because of its rich opportunities for building and advancing a career. These opportunities arise both from the depth and breadth of practice in a global financial centre such as London as well as from the possibility for junior staff of finding an experienced mentor.

The interviews we have conducted as part of our forthcoming report on location decisions “City as a Place for People” have built on this. For highly skilled individuals, it makes sense to work in London, where the most prestigious employers in the private and public sector, numerous international headquarters as well as the head hunters are based.

  

[1] These include occupation major groups 1-3.

[2] Occupations on 4-digit SOC code level.

Sources:

APS, Workplace Analysis, 2016

BRES, 2017

EMSI, Industry Overview, 2018

Ipsos Mori/City of London Corporation, Understanding Global Financial Networks, 2011

ONS user requested data, Jobs in London by SIC, SOC, HiQual, COB and age, 2015