Cicero Policy Briefer

Issue 14, July 2007

Skills, competitiveness and the City

By Teresa Sayers, Chief Executive, Financial Services Skills Council

It’s been more than 20 years since the Pet Shop Boys first sang “I've got the brains, you've got the looks, let's make lots of money”, but in the minds of City employers, the relationship between top brains and top dollar is as strong as ever. And they’re worried about it: more than four out of five of all UK financial services employers feel the need to improve skills among their employees in order to keep their competitive edge.

They aren’t the only ones worrying about skills. The national debate on UK skills provision, and the central role planned for employers outlined in December’s Leitch Report on Skills, is gathering momentum. The Government’s response to Leitch is published this month. And the Treasury has put skills under the spotlight too: the Financial Services Skills Council has just published “The Skills Review: UK Wholesale Financial Services”, undertaken for (then) Chancellor Gordon Brown as part of the work of his High Level City Group, looking at issues affecting the competitiveness of the City.

This review, intended to inform future Government strategy, outlines current and future skills gaps, and explores how some of the major players develop their people and work with academic institutions. Interviews were held with senior executives of wholesale financial institutions, including Citigroup, Deutsche Bank, Lloyds of London, Merrill Lynch and UBS Investment Bank.

The review showed that the percentage of overseas to UK graduates is increasing steadily, with France, parts of Eastern Europe, and Asia providing high-quality employees. The supply of home grown talent in the UK is directly affected by the educational system’s ability to produce highly numerate people. Engineers and science graduates, a popular source of recruits for the sector, are in increasingly short supply. As demand for the industry’s services grow internationally, the industry is becoming increasingly reliant on recruiting from an international pool of talent. As a global industry, this is to be expected, but it became clear from our research that the UK could offer more.

Key issues identified in the Skills Review include:

• Skills shortages, most common in: risk modelling and management; regulatory compliance, and actuarial skills; languages and cultural awareness. Employers identified language skills, cultural awareness and a superior work ethic as putting overseas candidates at an advantage over their UK counterparts when recruiting.
• Employers noted the increasing importance of high-level quantitative skills, as well as their acute shortage, especially in newly emerging areas that drive sector growth. In developing and transferring cutting-edge quantitative and computational finance skills, employers in this sector are often in the vanguard, but are eager to develop partnerships with academia.
• The rise in the significance of middle and back office operations and the demand for high-level skills has resulted in a number of significant skills lags. Issues of perceived lack of prestige and professionalism of these areas need to be addressed to ensure the attraction of high calibre staff and development of the necessary high-level skills. The impact of offshoring and globalisation on the development of career paths in these areas also needs to be considered.
• The drivers of change, particularly regulation and technology, give rise to new skills needs—for example, to implement new regulatory requirements and exploit increasingly sophisticated IT. Other skill sets are being made redundant as roles are offshored or replaced by technology.

The Chancellor’s High-Level Group meets again in the autumn and it will be interesting to see whether this element of his work stays at the Treasury or moves to No 10 with Gordon Brown. Over the coming months we intend to begin to implement the recommendations emerging from our skills review, working with stakeholders such as higher education, further education, schools and professional institutes - and most importantly, with the industry. So, while looks aren’t a prerequisite, we do need your brains. If the industry doesn’t have the skills it needs, in a few years we may be singing a different tune: “Leaving on a jet plane, don’t know when I’ll be back again…”

Teresa Sayers is the Chief Executive of the Financial Services Skills Council and can be contacted here.
Please see www.fssc.org.uk and click on Research and Projects for more about the studies mentioned in this feature.