City of London Economic Research

Creative professionals in the Square Mile

 

By Dr Edward Jones Research Officer at the City of London Corporation

 

Creative professionals might make up a small proportion of the City’s workforce but they are a crucial component of the wider business draw of the Square Mile. Whilst accounting for 7% of City professionals, creative talent provides crucial services to other businesses, helping to foster innovation and support competitiveness. Digital breakthroughs lead to innovation, and advertising and marketing expertise aids business communication, meaning that creative skills help City businesses push the boundaries and remain competitive. So its unsurprising that the largest employers of creative talent in the City are those which complement the wider business ecosystem – digital agencies, publishers, advertisers and architects.

More than half of the creative jobs in the City (18,405 workers) are in tech businesses. These jobs in IT, software and computer services have seen phenomenal growth in recent years, increasing 80% since 2010. This outpaces the growth of this sector in London (54%) and in Great Britain as a whole (48%). Their location in the Square Mile means they are close to the clients and competitors that keep them at the cutting edge. Digital tools and capabilities are rapidly transforming other services as fintech, insuretech, legal tech and regtech become part of the ecosystem’s landscape. This process requires the specialist knowledge of digital agencies, whose growth in recent years reflects the increasingly crucial role of tech to City businesses.

 

 

Both publishing (6,200 workers) and advertising and marketing (4,675 workers) also employ a lot of workers in the City, the latter having more than doubled its job count since 2010. The strength of these specialisms highlights the importance of communication and messaging to the knowledge based businesses in and around the Square Mile today.

The music, performing and visual arts sector is a small but fast-growing component of the City’s creative workforce. Home to world-leading cultural institutions such as the Barbican, the Guildhall School of Music and Drama, and the London Symphony Orchestra, the cultural impact of City is also felt in the presence of artists and performers, who have increased in number by 145% between 2010 and 2016, albeit from a modest numerical base of 745 professionals.

 

Our recent City as a Place for People report showed that there is an increasing blurring between specialisms, with creative solutions and novel perspectives being readily adopted in fields such as finance, insurance and law. The creative work done in-house by IT, marketing or communications workers is not necessarily captured in official estimates like the Business Register and Employment Survey (used in this blog), which are based only on the business area of the employing firm. This means that creative professionals in the Square Mile might will likely make up much more than the official 7% of the workforce.

The Culture Mile initiative has focused interest in the creative ecology of the City. An exciting new research project has recently begun exploring creative enterprise in Culture Mile, getting to grips with the activities which characterise the area’s unique creative offer. The data analysis and in-depth case studies that this project will generate promises to shed further light on the appeal of a Square Mile location for creative businesses.

 

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

 

Global talent for a global hub: how the City continues to attract workers from across Europe and the rest of the world

 

By Fiona Morrill, Financial Services Research Officer in the Economic Development Office

 

Our research programme for this year focuses on why the City remains a world-leading location for businesses and workers, and new data from the Office for National Statistics (ONS) reveals just how international the City’s workforce is, and how this has changed over time.

In 2016, 41% of City workers were born outside the UK, equivalent to just over 2 in 5. This is a significant jump from 2004 (the start of records), when 26% had been born outside the UK.

The data also allows us to look at the share of workers who come from the European Economic Area (EEA)[1], and workers from the rest of the world. While the share of workers born in the rest of the world has stayed relatively consistent over time, rising from 19% in 2004 to 23% in 2016, growth has been driven by EEA workers, the share of which has risen from 7% to 18%, over the same period.

 

 

We can also look at how this varies by sector, to get a sense of how important EEA and international workers are to key City sectors. The chart below shows that a third of the City’s combined financial and professional services workforce were born overseas, rising to 38% for information and communications, and over half in administrative and support services.

 

 

The data shows the importance of international talent to the City, and particularly how links between the UK and the rest of the EEA have deepened over the past twelve years. Going forward, a key concern for the City of London will be how to preserve these links, and to continue making the case for a clear post-Brexit immigration policy, to ensure the City remains a world leading global financial and professional services centre.

 

[1] The EEA includes EU countries and also Iceland, Liechtenstein and Norway

 

 

The role of large financial services firms in UK employment

 

By Dr Laura Davison, Head of Research at the Economic Development Office, City of London Corporation

 

My previous blog (28/09/2017) highlighted how important a role the UK’s large financial services (FS) firms play in generating turnover – with the 115 FS firms with more than £1 billion turnover generating 88% of the sector’s turnover.[1] This week, I’m looking at how important a role large firms play in employment, using new data from the Office for National Statistics (ONS), which lets us look at really large businesses – those employing many thousands of people.

To put financial services in context using the new Business Register and Employment Survey data (BRES)[2], there were 1.06 million financial services jobs in Great Britain in 2016 – 3.5% of employment. Nearly two thirds of these – 663K (63%) were based outside of London. Financial services grew by 26.5K jobs in the year to 9^th September 2016 – 2.6% growth, compared with 1.6% growth across all sectors; this represented 5.5% of the net jobs growth across Great Britain.

So, financial services plays a significant role in the UK’s economy. What part do the very largest firms play within this? Most forms of reporting define large firms as those employing 250 or more people. A new ONS dataset lets us look at much bigger firms – those who employ over 15K people, and those who employ between 3K and 14,999 people. [3]

Across the UK, 130 firms[4] employed more than 15,000 people in 2016; 10 of these were financial services firms (0.02% of all financial services firms). These 10 firms collectively employed 32% of the UK’s financial services roles, providing 328K jobs.

Although this represents a very high concentration of jobs in large firms, two other sectors are even more concentrated in their very largest (15K+ employees) firms – retail (48%), and public administration and defence (40%). For other sectors, this concentration is a lot lower – and in areas such as professional services, construction, property, and arts, there are no such firms listed.[5]

 Looking at the next level of businesses – those employing between 3K and 14,999 employees, there were a further 40 FS firms with between, collectively accounting for 21% of FS jobs. As the chart below shows, then, collectively 50 FS firms account for over half of the UK’s FS employees – some 539K jobs.

 It’s worth noting that the largest FS firms in the UK are bigger even than these categories would suggest – with banks such as HSBC and Barclays employing between 40K to 50K people in the UK.

 

[1] http://colresearch.typepad.com/colresearch/2017/09/the-importance-of-very-large-financial-services-firms-to-the-uk-economy-turnover-analysis.html  

[2] https://www.ons.gov.uk/employmentandlabourmarket/peopleinwork/employmentandemployeetypes/bulletins/

businessregisterandemploymentsurveybresprovisionalresults/provisionalresults2016revisedresults2015

[3] https://www.ons.gov.uk/businessindustryandtrade/business/activitysizeandlocation/adhocs/007466analysisofenterprisesintheukbyspecifiedemplo

eesizebandanduksic2007broadindustrygroup2016

[4] NB ONS counts are rounded to the nearest five.

[5] Though as counts are rounded to the nearest five, there may be one or two in practice.

The Digital Square Mile

 

By Dr Edward Jones, Researcher in the City of London Research Team 

 

The growth of the digital industries is a much-discussed phenomenon, credited with having transformed the economic fortunes of our near neighbours in Shoreditch and Hoxton. At the metropolitan scale, the Mayor of London anticipates that ‘Information and Communication’ (ICT) is set to increase to 668,000 jobs by 2050[1]. Finance and Insurance firms remain the biggest employers in the Square Mile (discussed in our 6^th October blog post[2]), but ICT is growing – potentially in response to the digital appetite of the City’s larger sectors.

Recently released Business Register and Employment Survey (BRES) data allows us to analyse the digital industries component of ICT in greater detail. Tech City UK has identified several four-digit Standard Industrial Classification (SIC) codes which justifiably cover the ‘digital tech’ sector[3]. Zooming in on these, while stripping out activities like the manufacture and repair of computer equipment, gives a fine-grained view of the performance of the ‘digital tech’ sector of the Square Mile, shown on the chart below.

 

 

The data suggests City digital firms might indeed be supporting the wider finance and insurance cluster. The City’s ‘computer consultancy activities’ sector has more than doubled to 13,500 employees from 2010 to 2016, and has widened its lead over other digital tech sectors. Computer consultancy across London has grown far less dramatically – at 42% over the same period.

Overall, Square Mile digital tech employees have increased by just over a half between 2010 and 2016, from 19,700 to 30,700. It may even be the case that digital tech activity in the City is greater than these figures suggest, for three main reasons:

Firstly, digital employees may be wrapped up in the wider SIC category of their firm. Digital and tech activities could be carried out in-house by businesses which lie outside ICT, such as financial services (FS) and insurance firms. Fintech is a growing phenomenon – PwC view digital innovations and technology-enabled change increasingly as a mainstream element of FS firms,[4] while Deloitte stress technological innovation as a major driver of change for FS[5].

Secondly, FS firms could ‘buy in’ digital tech expertise from businesses located outside the Square Mile. Recent research for us by KPMG indicates that 61% of financial institutions are partnering with innovators to develop their fintech capabilities[6]. City firms might exploit the digital business offer of the wider ecosystem, using the services of businesses registered in the rest of London, or indeed further afield.

Thirdly, firms doing digital tech work don’t necessarily categorise themselves as such. Both Spotify and Google have declared themselves part of the ‘other business support service activities not elsewhere classified’ SIC category[7]. The variety and reach of SIC codes do not necessarily capture the diversity of activities carried out by firms, and businesses might not choose to adopt the code which closely matches their overall function. Nathan and Rosso[8] have used big data to investigate ICT firms, and found the sector 42% larger than SIC-based estimates.

The chart below compares the numbers employed in the City’s digital tech with those employed in two generic support/ auxiliary categories. These ‘other’ SIC categories contain sizeable numbers of employees. It may be the case that, like Google and Spotify, some of the City’s digital tech firms form part of these less precise groupings.

 

 

The Information and Communication is a small but growing segment of the City’s economy, whose capacities to spark innovations in finance and insurance mean that its clout could be larger than SIC-based employee counts imply. The increasing use of digital skills by FS firms suggest that tech employees will continue to play a crucial role supporting, and integrating into, the wider cluster of finance and insurance businesses.

 

[1] https://data.london.gov.uk/dataset/long-term-labour-market-projections

[2] http://colresearch.typepad.com/colresearch/2017/10/jobs-growth-in-the-city-of-london-1.html

[3] http://www.techcityuk.com/wp-content/uploads/2016/02/Tech-Nation-2016_FINAL-ONLINE-1.pdf

[4] https://www.pwc.com/gx/en/industries/financial-services/publications/financial-services-technology-2020-and-beyond-embracing-disruption.html

[5] https://dupress.deloitte.com/dup-us-en/industry/financial-services/talent-technology-future-of-financial-services-survey.html

[6] https://home.kpmg.com/uk/en/home/insights/2017/10/value-of-fintech.html

[7] http://rss.onlinelibrary.wiley.com/hub/issue/10.1111/sign.2016.13.issue-3/

[8]http://eprints.lse.ac.uk/65211/1/Max_Mapping%20digital%20businesses%20with%20Big%20Data.pdf

 

 

 

Mapping financial services employment across London and GB

 

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

 

In previous blogs we have looked at jobs growth in London and beyond, noting that nearly 663K, or almost two thirds of financial services (FS) jobs were based outside of London. This blog sets out where these FS jobs are concentrated across the country and the capital using the latest Business Register and Employee Survey (BRES) data which was published earlier this month.

Total employment in the FS sector has been broadly stable over the past 6 years, reaching 1,055,000 jobs across Great Britain in 2016, a growth of 2.5 per cent from last year. However, the pattern of employment is ‘spiky’ across and within regions, as well as within the capital.

London is home to the greatest number of FS jobs, 393,000, but FS jobs are spread across cities and regions in GB. In the map below, you can see patterns of FS employment at the district-level within regions – districts are colour-coded according to their percentage share of total FS jobs in GB (2016 figures).

Figure 1: Share of FS employment in GB 

 

 Source: BRES, 2016 data. The map was produced in GIS.

 

Outside London and the South East, it is clear that FS jobs cluster in the following cities: Edinburgh (3.4%), Leeds (2.2%), Glasgow (2.2%), Birmingham (2.1%) and Manchester (2.0%). Despite having the second largest number of FS jobs of any region (119,000 in total), there is no comparable urban cluster in the South East. The region likely benefits from its proximity to London with FS jobs in the ‘home counties’ of Surrey, Hampshire and Kent.

We also notice two areas with a lower share of FS jobs which are striking because of their size. On the one hand, there is Swindon (0.9%) and Wiltshire (0.8%) along the M4 corridor. At the south end of the North West region, there is Cheshire – made up by Cheshire West & Cester and Cheshire East with each 0.9% of the total FS jobs in GB. The latter underlines the importance of the North West as the region with the third highest FS employment (98,000 FS jobs in total).

There has been a significant growth in the number of FS jobs in London of 17.6% over the past six years. The second map shows the pattern of where these jobs are in the Boroughs of Greater London in 2016. Inner London accounts for 355,000 (90% of) FS jobs in Greater London with The City of London, Tower Hamlets (home to Canary Wharf) and Westminster accounting for three quarters alone.

 

Figure 2: Map of FS employment in Greater London 

 Source: BRES, 2016 data. The map was produced with a visualisation tool provided by GLA datastore.

 

Within these geographies, the composition of FS employment reflects local specialisations. We have divided the FS sector for simplicity into “banks”[1], “insurance”[2], “trusts & funds”[3] and “financial market administration”[4].

Insurance is the biggest FS employer in the South East with over 58,000 jobs (almost half of FS employment in the region). In the North West, banks provide most FS jobs, totalling 33,000 (one third of FS employment in the region). Financial market administration also provides significant employment in both regions.

In Greater London, banks are driving FS employment in the City of London as well as in Tower Hamlets with 64,000 and 45,000 jobs respectively. In the City of London, this is closely followed by insurance with over 58,000 jobs. Trusts & funds which includes fund management activities are very present in Westminster where they make up a high proportion of FS jobs (37% of FS employment in the Borough) Lastly, jobs in financial market administration which provide support services to the other three categories can also be found in significant numbers across all three Boroughs.

While FS jobs tend to cluster in some locations as we have seen above, they are important employers in cities up and down the country. FS firms directly employ more than a million people, largely in highly skilled and well-paid jobs, but they also play a vital role in cities’ business ecosystems indirectly, by driving demand for other services. As Fiona Morrill’s blog post titled “The Chain Reaction” shows that financial and insurance services are crucial in supporting the wider economy.

 

[1] SIC codes 64110, 64191.

[2] SIC codes 651, 652, 653, 6621, 6622, 6629.

[3] SIC codes 643, 6630

[4] SIC codes 6611, 6612, 6619

 

  

Jobs Growth in the City of London

 

By Dr Laura Davison, Head of Research at the Economic Development Office, City of London Corporation

 

This week has seen the annual release of the latest Business Register and Employee Survey (BRES)[1], which we use as the basis for our reporting of jobs and employment by sector. The latest figures estimate jobs as at 9^th September 2016, and here I’ve looked at both what the figures tell us about overall employment in the City of London (Square Mile), and how this has changed from the year before (i.e. the change from 2015 to 2016).

Across these 12 months, jobs in the City have increased from 455K to 483K (2016) – an increase of 28K jobs (6%). This builds on a strong pattern of growth in the City since 2010, where every year since 2013 has seen overall jobs growth, as shown in the following chart.

 

 

 

The bulk of the new jobs created in the most recent year have been in the City’s largest sector – finance and insurance. This accounted for 18K new jobs – an 11% rise to 182K total jobs, and equivalent to 64% of the City’s total jobs growth. Within this, banking (2.5K), non-life insurance (3K), insurance brokers (2.5K) and ‘other financial services’ (2.5K) were the largest growth components.

The other City sector showing notable growth was business administration, with 5.5K new jobs – a nearly 10% increase to 63K jobs; this built on very strong growth in the previous year also. This sector is wide-ranging, covering areas such as employment agencies, leasing office equipment, and building services – though in this instance, the majority of growth (3K jobs) fell into the ‘other’ category, followed by employment placement agencies (1.5K) and general cleaning of buildings (1K).

Professional services remains the City’s second largest sector, with 115.5K jobs in 2016. In contrast to 2014 - 2015, this period has seen a small fall in jobs (2.5K fewer, a drop of 2%). Within this, though, two of the three subsectors comprising ‘related’ professional services[2] have seen small jobs growth – a 2.5K rise in legal services jobs (to 61K) and a 1K rise in management consultancy jobs (to 31K), while the third area – accounting, has seen a small fall  (0.5K fewer jobs, now 17K).                

The information and communication sector, which has also shown strong growth in the City in recent years, has slowed this year, rising from 37K to 38K jobs (2.7% growth).

Other sectors in the City are both relatively small and have seen only small changes this year, although it is worth highlighting that construction has grown by 1.5K jobs to 7.5K jobs, and health similarly has grown by 1.5K to 7K jobs.

As the following chart shows, the balance of jobs in the City has remained very consistent. In 2015, the three biggest sectors accounted for 75% of jobs in the Square Mile – 36% financial services, 26% professional services, and 13% business services. In 2016, the overall figure remains 75%, split 38% financial services, 24% professional services, and 13% business services.

 

 

 

The data also reinforces the City’s role in wider London growth, where it makes up 9.4% of jobs. Net employment growth across London was nearly 71K new jobs, with the City accounting for the highest number of these (28K), followed by Camden (15K) and Hounslow (11K). 

 

[1] https://www.ons.gov.uk/employmentandlabourmarket/peopleinwork/employmentandemployeetypes/bulletins/

businessregisterandemploymentsurveybresprovisionalresults/provisionalresults2016revisedresults2015

[2] Professional services is a very wide-ranging category, for example spanning areas such as architecture, research and development, advertising, and veterinary services. Here, ‘related professional services’ refers to those subsectors with the closest linkages to finance – legal, accountancy, and management consultancy. 

 

 

 

International workers in financial professional services

 

By Robert Clear, Researcher in the City of London Research Team

 

The UK’s finance and professional services (FPS) sector is highly dependent on international talent, with workers from abroad holding 12% of its jobs. With EU citizens’ future work and residency rights unclear, and in light of the Government’s pledge to reduce immigration to the tens of thousands, there is a risk that the industry’s access to international talent may diminish. Here we take a brief look at how dependent FPS is on international workers, comparing London with the United Kingdom as a whole.

 

In 2016, 92% of all jobs in the UK were occupied by British nationals, with most of the remainder held by EU citizens, who occupied 5% of all jobs, compared to 3% held by people from elsewhere in the world. In London there was a marked slant towards international workers, who held slightly under a quarter of all jobs. The majority of these were from the EU (15% of the whole vs. 9% from elsewhere) – reflecting the trend at the national level.

 
Source: ONS Annual Population Survey 2016

 

London, the centre of the UK’s finance industry, was home to 35% of all FPS jobs in 2016 – 432,000, compared to 811,000 for the rest of the UK (i.e. excluding London). And the capital’s overall reliance on foreign workers in the case of finance and insurance is considerable. 78% of jobs there are held by British workers, with 13% from the EU and 9% from elsewhere ­– whilst outside the capital around 95% of FPS jobs are British, with 2.5% held by EU citizens and 2% by foreign nationals.

The ONS data available to us on nationalities in FPS subsectors is limited to ‘British’ and ’other nationality.’ But even from this we can see variations in the dependency on foreign talent. The groups ‘financial services except insurance and pension funding’ and ‘activities auxiliary to financial services and insurance’ both have levels of foreign workers close the the average level for London: 73% and 80% respectively. In ‘insurance, reinsurance and pension funding,’ however, only 10% of workers are from outside the UK. This is closer to the levels of foreign FPS jobs in the UK overall.

  Source: ONS Annual Population Survey 2016

 

  Source: ONS Annual Population Survey 2016

 

The disparity between London and the rest of the UK in its dependence on international talent is marked. Not only is there a greater proportion of foreign workers in FPS in the capital than in the country as a whole, but the sector itself is London’s fourth largest employer ­– after ‘professional, scientific and technical’ [625,000], ‘human health and social work activities’ [555,000] and ‘education’ [514,000]. This means that policies to significantly reduce access to international talent will have a significant impact both on the sector and on London’s economy.

 

 

  

The link between corporate values, ethics and employee recruitment: empirical evidence from the professional services industry

 

By Angelika Bialowas and Jonathan Andrews, Future Trainee Solicitors at Reed Smith LLP

 

Over June-July 2017, as part of a Business Intelligence Project for MA (LPC) as Future Trainee Solicitors at Reed Smith LLP, we undertook a research project for the City of London Corporation. The project sought to understand the extent to which corporate values and ethical practices are important for young employees (aged 35 and under) in business, particularly in terms of recruitment and retention.

Existing research had suggested that young employees were attracted to employers with values matching their own, but it remained unclear which values most influenced the experiences of young employees working at, and applying to, professional services firms, and whether these were as important as other employment aspects, such as salary and career progression.

Research

Our research involved carrying out interviews and an online survey with HR professionals and young employees working in professional services in the City. The research allowed us to look at the differences in interpretation of corporate values and ethics between the two groups, uncover any misperceptions concerning the importance of values, and determine particular terms that were most important to young workers. Some interesting themes and results emerged.

1. The importance of values towards recruitment: In line with previous research, almost all respondents stated they would not work somewhere that did not fit their values, indicating the importance of values for applicants at the recruitment stage.

 

          

 would not work somewhere that did not fit their values

 

 

 

However, when asked to consider the extent to which company values helped them choose where to work, none replied that it was the most important factor. The majority of young employees indicated that such values were just ‘one factor among many’. While values are clearly important to young employees, they must come as part of an attractive package and not be stand-alone.

  

 

 

 2.   The importance of values towards staff retention: the overwhelming factor impacting retention was career progression; over 80% respondents cited either ‘career/progression opportunities’ or ‘career development’ as the most important factor for deciding how long to remain with an organisation. This was closely followed by workplace environment, also variously expressed as ‘work-life balance’, ‘nature of work’. Only one respondent directly linked workplace environment to corporate values being ‘well implemented in practice’

3.    Key values for young employees: Commonly cited as the most important values by young employees were ‘diversity’, ‘equality’, ‘meritocracy’ and ‘fair hiring’. Many also cited ‘work-life balance’ and ‘opportunities for career progression’. When considering examples of tangible actions to help imbed values, popular responses included more Corporate Social Responsibility/charity/pro bono initiatives, as well as initiatives to boost social mobility and diversity among staff. Openness around career progression was mentioned several times, this being a pervasive theme throughout questions; as was the idea of fixed yearly targets around initiatives tied to values, like standards for ethical supply chain

4.   Perceptions of most important values to young employees: Interestingly, while HR professionals tended to agree with each other on what was most important to young employees, their answers varied substantially from those given by the employees themselves. HR professionals tended to be more abstract in their suggestions, whereas the majority of young employees tended to offer more specific issues not cited by HR. Both groups shared a dislike of values being merely ‘corporate speak’ or ‘just a piece of paper’, despite HR proposing abstract values which young employees would be likely to regard as just that. Differences in interpretation and a lack of communication between groups in this way showed itself likely to cause misunderstandings and lead to less joined-up values policy. This problem was also common between employees of different generations and levels of seniority.

 

 

 

   shared a dislike of values being corporate speak

  

  

5.   Recommended companies to others: Questions which asked for ‘one thing’ that made the employee most proud of the firm, and which would make them likely to recommend their company to a friend, were surprisingly similar. ‘Good working environment’, ‘work-life balance’ and ‘friendly atmosphere’ were collectively the most cited factor(s); several also cited an ‘open-door policy’. Other responses included diversity/meritocracy/social mobility, volunteering, team-working and high-quality work.

 

Business recommendations

Our research results concluded that the fit between the individual’s and company’s values can influence how strongly employees, and potential employees, are attracted to, fit into, and remain committed to the company. Yet, the values of a company are just one among many factors that young employees consider when joining or staying at a firm. Despite this, there are potential ways that businesses can help create a stronger link between young employees and corporate values held.

One of our key recommendations for businesses was to conduct yearly meetings between HR and employees, where employees can discuss their interpretations of values, how they would like to role-model them, and whether they feel the firm supports them in expressing their values. More broadly, we also recommended discussions between employees of different seniority levels, different sectors and different generations on a regular basis.

Other recommendations included ensuring values were kept up to date and relevant at all times – one interviewee mentioned that his organisation had no plans to change any of the original values, despite all founders having since left. Companies should gleam from discussions with employees whether values, or values strategy, need to be updated or overhauled at any particular time.

By taking values and concerns such as career progression seriously, while tackling miscommunication and differences in interpretation around these issues, organisations can strengthen their chances of recruiting and retaining the best talent among young employees.

 

  

 

 

The UK’s productivity puzzle: regional and sectoral differences

Maxine Kennedy, Research Officer in the Economic Development Office

This week’s blog looks at the new data on productivity in the UK.

What is productivity and why is it important?

Productivity, measured as output per worker, per job and per hour, tells us how efficient resources are being used and is a key indicator of how well the economy is performing.

Long term global data has shown that productivity accounts for the majority contribution towards Gross Domestic Product (GDP), and as such is a key determinant of economic performance, and an indicator of a country’s living standards.

What is the long-term trend in UK productivity?

Often termed the ‘productivity puzzle’, UK productivity has been relatively stagnant over the past decade or so. Following the economic downturn in 2007/08 productivity fell, and despite a strong labour market, it has not yet returned to the pre-crisis trend.

UK, seasonally adjusted, quarter 1 (Jan to Mar) 1994 to quarter 4 (Oct to Dec) 2016[1]

Source: ONS. https://www.ons.gov.uk/employmentandlabourmarket/peopleinwork/labourproductivity/articles/ukproductivityintroduction/octtodec2016

There are several hypotheses for this: first, that the financial crisis led to decreased lending and investment in potentially productive firms; that a lack of investment in equipment and machinery has meant that employees are not working with the most efficient technology available; that there are slowing rates of innovation, or that employees are not making the most of their skills at work. Others have also proposed that how we calculate productivity doesn’t capture the rising importance of the digital economy.[2]

It is also interesting to note that there are sectoral differences affecting productivity. For instance, it has been noted that increased compliance and regulation in the financial services sector following the crisis may have had a negative effect on productivity in that sector, though this may be only be for the short term while the sector adjusts.[3]

However, economists believe that none of these reasons on their own can explain the trend, hence it being coined a ‘puzzle’.

What does the latest UK productivity data show?

The latest data was released by the ONS earlier this month and shows a positive upswing in productivity. Productivity in Q4 2016 was 0.3% higher than Q3 2016, and 1.1% higher than in Q1 2008, immediately prior to the recent economic downturn.[4]

However, the 0.4% quarterly growth remains below the 1994 to 2007 average, and even the ONS warn that the recent positive trend doesn’t indicate an end to the UK’s productivity puzzle.[5]

Regional and sectoral differences in the UK’s productivity?

Andrew Haldane, Chief Economist at the Bank of England, recently analysed UK productivity by looking at firm level data, showing the differences and similarities between firms through a regional, sectoral and export status lens.

We might suspect that productivity varies considerably across the UK’s regions. Looking at data compiled by the ONS and the Bank of England, we can see that overall, London’s productivity is the highest of any region in the UK; it is 75% higher than the region with the lowest productivity, which is the North East.[6]

However, looking at data on productivity at the firm level, we can see that high productivity firms consistently feature in every region in the UK. The distribution does vary from region to region, but the same pattern is seen throughout: a smaller pool of highly productive firms, compared to a majority number of lesser productive firms.

The graph below shows that London has a tighter distribution of highly productive firms (i.e. there are more highly productive firms and fewer low productive firms in London as opposed to the North East, where the pattern is reversed).

Firm level productivity distribution, by region

 

Source: ONS, ONS Research Database, BvD and Bank of England calculations. See: http://www.bankofengland.co.uk/publications/Documents/speeches/2017/speech968.pdf

Looking at the firm level data across different industries, we see a similar trend. There are overall differences between sectors, for instance the information and communication and the professional, scientific and technical activities are the most productive (this might not be so surprising since we would expect to see innovation particularly in these sectors), and manufacturing tends to be more productive than construction. It’s important to remember that each sector also faces unique circumstances that affect productivity.[7]

Yet, again, we see a similar pattern: within each sector there is a similar distribution, will all sectors having a smaller number of highly productive firms, who are innovating and leading the way, and a larger number of less productive firms.

Firm level productivity distribution, by sector

Another key finding is the difference between firms who export as compared to those who don’t. The graph below shows that those firms which do export, and so are faced with global competition, tend to be highly productive. This suggests that openness to global trade is a key contributor to long term economic growth.

Firm level productivity distribution, by export status

Source: ONS, ONS Research Database, BvD and Bank of England calculations. See: http://www.bankofengland.co.uk/publications/Documents/speeches/2017/speech968.pdf

Quite clearly, productivity is crucially important to the future of the economy, and consequently we’re seeing more focus on the topic by the Government and other stakeholders. In 2015, the Government launched its Productivity Plan – the latest update to its implementation is here: https://www.publications.parliament.uk/pa/cm201617/cmselect/cmbeis/931/931.pdf

[1] https://www.ons.gov.uk/employmentandlabourmarket/peopleinwork/labourproductivity/bulletins/labourproductivity/octtodec2016

[2] See: https://www.publications.parliament.uk/pa/cm201617/cmselect/cmbis/87/87.pdf

[3] http://pwc.blogs.com/press_room/2015/06/financial-services-firms-want-government-to-reduce-cost-of-regulatory-compliance-cbipwc.html

[4] https://www.ons.gov.uk/employmentandlabourmarket/peopleinwork/labourproductivity/bulletins/labourproductivity/octtodec2016

[5] https://www.ons.gov.uk/employmentandlabourmarket/peopleinwork/labourproductivity/bulletins/labourproductivity/octtodec2016

[6] Latest data available for the regional level. See: http://www.lse.ac.uk/Events/2017/03/20170320t1830vOT/The-Productivity-Puzzle

[7] http://www.cbi.org.uk/better-off-britain/Productivity.html