City of London Economic Research

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 balancing act: how the UK’s record trade surplus in finance and insurance supports the wider UK economy, and shows the international reach of UK financial services

 

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

 

This week we’ve been looking at the ONS’ new data on international trade in financial and insurance services in 2016[1], which help to shape our understanding of how finance supports the wider UK economy, and the international reach of UK financial services. I’ve looked at the growth in financial and insurance exports over time, and where these exports go to internationally, to get a sense of where the UK’s global links lie.

In this blog post we look at three key concepts in services trade: exports; the services the UK supplies to international markets; imports, the services the UK demands from international markets; and the surplus, or exports less imports, which reflects the net services trade balance. We look at both the combined contribution from financial and insurance services, as both are important within the Square Mile, London and the UK, as well as splitting these out when we start looking at geographical trade patterns, as the two are very distinct.

At the top level, the trade surplus generated by financial and insurance services reached a record high (since records began in 1986) in 2016, forming the biggest contributor to the overall increase in the UK’s services trade surplus.

• Exports – (shown by the green and blue stacked bars below) The UK exported a record high of £79 billion in financial and insurance services in 2016, rising almost £12 billion or 18% on 2015’s total of £67 billion.
• Imports – (shown by the yellow line below) By contrast, imports of financial and insurance services have remained relatively stable, rising to £11 billion in 2016 from £10 billion in 2015.
• These two trends combined mean that the financial and insurance trade balance (shown by the purple line below) has risen to £68 billion, up from £57 billion in 2015, a rise of £11 billion or 20%.

 

Source: ONS, Pink Book, 2017

Focus on: finance:

Taking financial services trade alone, exports reached £61 billion in 2016, a record high, and an increase of £9 billion or 18% on 2015. Financial services exports are made up of monetary financial institutions’ exports (banks and building societies fees), transactions involving financial instruments (so for example raising equity, issuing debt, and managing risk using financial markets), fund management and financial intermediation including borrowing and lending services. Fund management alone accounted for a £1 billion rise in FS exports, or a quarter of the total increase, demonstrating the increasing importance of the UK as a hub for fund and asset management.

Focus on insurance:

Looking at insurance services, exports reached almost £18 billion in 2016, an increase of almost £3 billion or 19% from 2015.   Insurance services exports are made up of freight insurance on imported or exported goods, direct insurance (life, accident, fire, marine and aviation), reinsurance and pensions. The rise in insurance exports was driven by a rise in the ‘other direct insurance’ category, which includes (amongst others) accident and health insurance; marine, aviation and other transport insurance; fire and property insurance, as well as ‘auxiliary insurance services’, including activities of brokers and agencies. The direct insurance services outlined below accounted for £2 billon of the rise, reflecting London and the UK’s status as an insurance hub.

The global reach of financial and insurance services:

Looking at where these services go, the EU remains the UK’s largest trading partner, accounting for 36%, or over 1 in 3, of financial and insurance services exports. The share is slightly down on 2015’s 41%, driven by a drop in insurance exports of £2 billion, somewhat offset by a rise in FS exports of £3 billion. Elsewhere there’s been little major change in terms of finance and insurance export destinations except for Japan, where the UK has increased its exports to £5 billion from £3 billion, and now accounts for 6% of UK exports.

The map below shows the value of UK’s financial and insurance exports to our global trading partners in £millions in 2016, and the % of the UK’s finance and insurance exports these countries account for.

FS trade blog
Infogram

NB. Map shows UK trade with individual countries within the EU. As a single bloc, the EU accounts for almost £29 billion of 36% of UK exports. Map also excludes countries classified as ‘other’ by the ONS, which accounts for £25 billion or 32% of UK exports.

Source: ONS, Pink Book, 2017

 

The wider benefits of trade

As well as demonstrating the UK’s competitiveness in financial and insurance services, the record highs in finance and insurance exports and trade balance provide wider benefits to the economy, including:

• The UK’s financial and insurance services trade surplus helps to balance the UK’s overall trade deficit, driving the UK’s trade surplus and offsetting more import-intensive activities.
• Access to global marketplace ensures that UK financial firms can benefit from benefits of scale and specialisation, providing jobs and boosting growth. The FS trade surplus reflects the globally competitive and specialised nature of UK financial services, with a leading share of foreign exchange turnover, cross-border bank lending and debt issuance.
• The benefits of efficiency from servicing larger markets means that UK firms and households also benefit from high quality and competitively priced financial services, supporting their growth and expansion.
• Firms that export also tend to be more productive and more innovative[2] meaning they contribute more towards UK economic growth, and are likely to make a higher tax contribution.

The importance of financial services trade to the UK economy and the role of the UK as a global asset and FS hub, underlines the importance of securing access to the UK’s largest trading partner in FS, the EU, as well as the importance of ensuring certainty in our future trade and investment relationships with key global partners, to enable the industry to continue to serve its domestic and global customers.

 

 

[1] ONS, The Pink Book, 2017, https://www.ons.gov.uk/releases/unitedkingdombalanceofpaymentsthepinkbook2017

[2] Harris and Li (2006), https://www.gla.ac.uk/media/media_36279_en.pdf

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. 

 

 

 

The importance of very large financial services firms to the UK economy: turnover analysis

 

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

 

Across the UK economy, there were 5.5 million private sector firms in 2016 - 0.1% were large firms (employing 250 people or more), jointly accounting for 40% of employment and 53% of turnover.[1] My recent blog highlighted how particularly important these large firms were in financial services (FS), with the 355 large FS firms (0.4%) accounting for 72% of the sector’s jobs.[2]

New data from the Office for National Statistics (ONS) now lets us look at the turnover[3] and employment profile of really large firms - data not usually available - so in this week’s blog, I’ve analysed the impact of the largest FS firms on the UK economy in terms of turnover; next week’s blog will cover employment.

Although relatively small in number - 2% of the UK’s 2.55 million VAT / PAYE-registered firms - financial services firms accounted for a disproportionately high proportion of UK turnover - 24%. Alongside this, FS had the largest number of firms in the highest turnover band – those with annual turnover of more than £1billion; there are 455 such firms in the UK – 115 of these are FS firms.

 

These 115 FS firms with very high turnover played a huge role in generating the sector’s total turnover – although only 0.2% of FS firms by number, they generated 88% of the FS sector’s turnover. Not only is this highly significant in terms of the role this small number of firms play, it also reflects that financial services turnover is much more significantly generated by very large firms than in other sectors. You can see this difference in the following chart - for UK data excluding financial services, the equivalent figure is 38% of turnover generated by firms with £1 billion plus turnover.  

 

 In fact, as the next two charts show, if you look at the 99.8% of FS firms with less than £1 billion turnover, their profile is broadly proportionate in the UK context – 2% by number and 6% of turnover.

 

 

 Whereas the small group of £1 billion plus FS firms are much more significant – 25% by number and 42% by turnover.

In fact, even looking at these 115 firms in the wider context of the UK economy – where they constitute 0.005% of the UK’s VAT-registered firms - they accounted for 21% of the total turnover. This gives you an idea for just how sizeable these large FS firms are and how large a role they play, both within the financial services sector and across the UK economy as a whole – and next week, we’ll be looking at whether the same holds true in the employment patterns.

 

[1] https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/559219/bpe_2016_statistical_release.pdf

[2] http://colresearch.typepad.com/colresearch/2017/04/in-this-article-ive-analysed-data-on-the-distribution-and-location-of-uk-firms-and-jobs-in-financial-services-highlighti.html

[3] https://www.ons.gov.uk/businessindustryandtrade/business/activitysizeandlocation/adhocs/007502analysisofenterprisesintheukbyuksic2007broadindustrygroupandspecifiedturnoversizebands2016

 

 

 

 

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.

 

  

 

 

Why is it important for large international banks to be based in the City?

 

By Saif Ullah, Researcher in the City of London Research Team 

 

Over the last month, several large international banks have begun to provide more details about their location plans post-Brexit. Some of the announcements have arisen partly as a response to the Bank of England’s request for information of banks’ plans should the UK leave the EU without an exit agreement. Major US banks such as Citi and Morgan Stanley both revealed that they would be creating new EU bases in Frankfurt, potentially involving some staff moving from offices in London, while Bank of America announced that it had selected Dublin as its post-Brexit EU hub. Several Japanese banks, such as MUFG, Nomura, Daiwa and SMFG have also recently revealed plans to set up new offices or subsidiaries in other EU states (all plan to base EU operations in Frankfurt, with the exception of MUFG which will reportedly expand its Amsterdam office).

In the Research team, we’ve been closely monitoring firm movement announcements of financial and professional services firms over the last year. More recently, we’ve been looking at the implications of large bank’s moving staff away from the City to other locations and what they stand to lose as a result.

So far, it is unclear how many bank employees could leave firms in London and the City. While it is more than likely that there will be a number of staff relocations abroad, many banks have yet to lay out specifics on the potential number of moves, given the uncertainty over how Brexit negotiations may develop. Actual numbers of confirmed staff moves are currently at the lower end (500-600),[1] but recent estimates from Oliver Wyman suggest that as many as 40k employees from wholesale banking alone could eventually leave the UK as a result of Brexit.

Yet several factors may dictate whether large banks keep the majority of their employees in London, and more specifically the City. One of the key motivations for banks to keep staff in London is the attractiveness of the capital as a place to live and work, a factor recently highlighted by the City Corporation’s Policy Chairman.

Another key factor is that banks benefit from being based in the City given the strong mutual dependency between financial services firms, professional services and tech firms. Fiona’s blog last week illustrated some of the key business demand relationships between financial services and other IT and professional services sectors in the UK, with FS accounting for over a quarter of business demand for telecoms, 22% of demand for computer programming services, 17% of demand for legal services, and almost a third of demand for head office activity and management consultancy.  

With proximity to clients and customers being a major factor in firms’ location decisions, it stands to reason that major banks choose to locate in the City given the immediacy of partners in other related sectors, whose services they require. In addition, the City’s dense business cluster allows such firms to benefit and recruit from a large pool of specialist, skilled workers.

This links neatly on to my final point – the importance of the UK’s workforce to large banks’ and the availability of skilled workers in London and more widely. As Laura highlighted in a blog published earlier this year, large financial service firms employ huge numbers of workers in the UK, and large banks in particular are dominant in terms of banking employment numbers – 80 very large banks (500+ workers) employ 84% of bank workers in the UK.

 

The same is true of large banks based in the City. The City accounts for 16% of banking employment in the UK and has the highest concentration of banking jobs in London (58k compared to 46k in Canary Wharf).[2] Nine of the largest global investment banks are based in the City, employing over 29k people, more than 50% of banking jobs in the City. Large banks are reliant on significant worker numbers across the UK and in the City specifically, and this mix of talent is not something that can be readily replaced or transferred to other vicinities.

The current wave of media reports concerning bank staff moves suggests that there could be an exodus of City workers on the horizon. However, the benefits of a City location for banks in terms of access to required services, attractiveness as a location, and depth of talent, remain significant. Recent commitments from the likes of Deutsche Bank to maintain a major presence in the City suggest that whatever happens, large banks will recognise the capital as a prime location for years to come.

 

 

[1] Based on the City Corporation’s internal FS firm movement tracker

[2] ONS, Business Register and Employment Survey, October 2016

The chain reaction: How the financial service sector’s demand for goods and services supports the wider economy

 

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

 

The financial and related professional services sector plays a key, direct role in enabling other firms to grow; through financing investment in capital; supporting the day to day running of their businesses through managing cash flow; providing insurance to protect against risks; and advising firms on strategy, tax and legal issues. But what role does the sector play in terms of supply chain links and demanding services from other industries, indirectly supporting their growth and jobs? This blog looks at the current links between FS and other sectors, with a particular focus on technology services, and how these linkages have changed over time.

 

The current relationship between financial services and the wider economy

This week (31/07/17), I’ve been looking at the ONS’ Input-Output tables[1], which enable us to look at industries’ use of products based on industry classifications at the UK level. The data gives an idea  of the current links between the financial services sector and other industries, and how these connections have developed and evolved over the past few years. This is particularly apparent looking at the ties between the financial services sector (FS, including finance, insurance and their related activities) and emerging and growing industries like computer programming, telecoms and information services. This is partly driven by increasing efficiencies in existing business, be that secure trading platforms, sophisticated risk management systems, data analysis or cyber security, and the finance sector increasingly leads on the adoption and adaptation of new technology in areas like FinTech, InsurTech and RegTech[2].

The infographic below shows the kinds of inputs used by the FS sector. Alongside sectors we might expect to have strong linkages with FS - such as asset management, pension funding and insurance and re-insurance, and related activities  - we can also see the links between sectors like management consultancy and head office activities (8.6% of FS sector inputs), computer programming (7.6%), and telecommunications services (5.9%).

 

Inputs used in producing financial services – sector share of total (2014)

Source: ONS, Input-Output tables, 2016

NB. ‘Other’ refers to industries with a lower than 2.5% share of FS inputs.

As well as looking at what inputs are demanded by the FS sector, we can look at how much of total demand for those sectors the FS sector accounts for, to get a sense of the role FS plays in supporting growth and demand in other industries. The table below shows the products purchased by the FS sector and the percentage of total demand the FS sector accounts for (with sectors where FS makes up less than 5% of demand excluded), colour coded from red (weaker linkages) to green (stronger linkages).

 

What does the FS sector purchase and what percentage of demand does it account for? (2014)

 

  Source: ONS, Input-Output tables, 2016 (sectors where FS makes up less than 10% of demand not shown)

 

While FS accounted for 3% of jobs across the UK[3] in 2014, the sector made a disproportionately high contribution in terms of supporting demand in other sectors. Altogether, finance and its related services account for £136 billion, or 9%, of UK total intermediate demand for all products and services, and if we exclude financial services demand for all types of FS products, this equates to 7% of total demand.

The FS industry plays a key role in generating demand for related professional services, including head office and management consultancy (30%), accountancy and tax (24%), and 17% of legal services. The sector accounted for over a quarter (26%) of total demand for telecommunications, and a fifth of demand for computer programming and information services (22% and 20% respectively), demonstrating the close linkages between financial services and the growing tech sector.

 

How has the relationship between financial services and technology changed over time?

Financial services and technology have always been closely interlinked, given the development of innovations in FS like credit cards, ATMs, electronic stock trading and online banking. At the City of London level, the changing nature of jobs and work has meant that financial services and technology are more interlinked than ever before, with the development of activities like FinTech, and the clustering of these firms on the City’s fringes reflecting the importance of these industries’ physical proximity to each other. At the UK level, after head office services and management consultancy, computer programming was the second largest category of input (i.e. goods and services demanded) by the FS sector reflecting the technology intensive nature of financial services today.

The chart below shows the development of the links between FS and technology over time. Between 2004 to 2014, the use of computer programming in the FS sector has increased from £5.9 billion in to £10.3 billion, an increase of 76%, with FS’ share of computer programming services rising from 18% to 22%. Likewise, the sector’s use of telecommunications services has risen from £5.5 billion in 2004, to £8.0 billion in 2014, an increase of 45%, while FS’ share of telecommunications services rose from 23% to 26%.

 
Source: ONS, Input-Output tables, 2016

 

The ties between FS and tech have evolved from the use of technology in providing retail banking and exchange-based trading and broking, to mobile wallets, payment apps, biometrics, robo-advisors and blockchain technologies emerging today. The industry has evolved from small scale start-ups and innovation within existing large FS firms, to new and emergent industries like FinTech, InsurTech and RegTech becoming important sectors in their own right.

Taking FinTech as an example, over the 2008 to 2013 period, the UK and Ireland saw the fastest growth in FinTech investment globally, at an annualised rate of 74 percent from 2008, compared with 27 percent globally and 13 percent in Silicon Valley. During the same period, the value of FinTech investment in the UK and Ireland increased nearly eightfold to $265 million in 2013. The annualised growth rate (51 percent) was nearly twice the global average (26 percent) and more than twice that of Silicon Valley (23 percent), with London emerging as a key European and global FinTech hub[4]. This cluster of activity continues to make a significant contribution to the UK economy, generating an estimated £20 billion of revenue in 2015, and providing 61,000 jobs across the UK, with 44,000 of these based in London[5]. This demonstrates just one of the potential avenues whereby FS and tech working together can make a significant contribution to jobs and growth in the UK.

 

How might this change in the future, and what does this mean for the economy?

Looking ahead, the links between financial services and technology look set to continue to deepen, with technology facilitating and transforming the FS offer across a range of areas like banking, payment and settlement, investment management and insurance.

According to Deloitte, who named London as a top global FinTech hub, the next 12 months will see the industry forging greater global FinTech connections to continue to support the developed ecosystem in the UK, and realise their global ambitions[6], and the potential for continued innovation exists across all financial services subsectors.

As well as improving access to financial services for both individuals and SMEs at the customer level, the links between financial services and technology will continue to benefit the wider economy, creating jobs and growth through supply chain linkages.  

 

[1] ONS, Input-Output tables, available here: https://www.ons.gov.uk/economy/nationalaccounts/supplyandusetables/datasets/inputoutputsupplyandusetables

[2] City of London Corporation, Tech X the City, available here: https://www.cityoflondon.gov.uk/business/economic-research-and-information/research-publications/Pages/Tech-x-the-city.aspx

[3] ONS, Workforce Jobs by industry (2014 average), available here: https://www.ons.gov.uk/employmentandlabourmarket/peopleinwork/employmentandemployeetypes/datasets/workforcejobsbyregionandindustryjobs05

[4] Accenture analysis of CB Insights data, available here: https://newsroom.accenture.com/subjects/research-surveys/london-is-benefitting-from-fintech-investment-boom-according-to-accenture-study.htm

[5] EY, UK FinTech on the Cutting Edge, available here: http://www.ey.com/Publication/vwLUAssets/EY-UK-FinTech-On-the-cutting-edge/%24FILE/EY-UK-FinTech-On-the-cutting-edge.pdf

[6] Deloitte, A tale of 44 cities: Connecting Global FinTech,  https://www2.deloitte.com/content/dam/Deloitte/uk/Documents/Innovation/deloitte-uk-connecting-global-FinTech-hub-federation-innotribe-innovate-finance.pdf