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Regional/National Dimension

Key facts:

  • London, the South East and the North West account for half of all employment in the sector and an even larger share of output.
  • London dominates the sector accounting for more than a third of total output.
  • Financial clusters are the main engines of growth in the sector. The most important are in the City of London (including Canary Wharf and the City Fringe), Edinburgh and Glasgow.
  • The largest financial services workplaces appear to be concentrated in areas with low costs and good links to well-developed financial clusters.
  • The biggest skills challenge is faced by fast-growing regions losing staff to London, Scotland, Yorkshire and the Humber, the South East and Wales.

For more detail on the Financial Clusters in the UK go to the 2008 report.

Sources: Financial Services Clusters 2008, FSSC The Skills Bill: England 2008, FSSC The Skills Bill: Analysis of Skills Needs in UK Financial Services 2007, FSSC UK Financial Services: Five Years Forward 2006


Regional output and employment

Financial services employment and output is unevenly concentrated among the regions. London and the South East, the two regions with the greatest number of financial services employees, together account for over one third of all financial services employment, whereas Wales and Northern Ireland account for 5%. Although most of the sector’s employment is located in England, Scotland’s financial services sector is also substantial in size, accounting about one in ten financial services employees.

Regions with a greater concentration of financial services jobs tend to attract higher value-added work. Because of this tendency, industry output is even more concentrated than employment. London and the South East account for about half of the industry’s total output, while the East of England and Scotland are also strong contributors.

Because lower value-added jobs (such as administrative and customer services roles) tend to suffer from increased turnover, financial services vacancies are not distributed in the same way as the jobs themselves. High value-added concentrations tend to have more full-time, professional or managerial jobs and thus produce fewer vacancies.

Strong financial clusters and productivity gains determine the growth prospects of each region. London and Scotland will see the highest growth rates in the near future, in both output and employment. Financial services in Northern Ireland is also likely to grow substantially, but due to strong productivity gains employment will remain subdued.

Sources: FSSC The Skills Bill: Analysis of Skills Needs in UK Financial Services 2007, and FSSC UK Financial Services: Five Years Forward 2006

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Financial sector organisations by region

The largest financial services workplaces are concentrated in areas that are close to well-developed financial clusters, but do not overburden firms with costs. The South East and Scotland are home to larger establishments. The East on England, the region with the largest average establishment size, is an exception as it relies almost exclusively on insurance, a sub-sector in which establishment size is typically larger.

Within the clusters themselves, establishments tend to be small as rent is high and small teams or boutique firms can still earn substantial profits. The average establishment size is smallest in London.

In order to reduce costs, employers maintain only higher value added roles in expensive locations. Thus many locations tend to accumulate large concentrations of back-office roles mainly on the basis of costs while others compete for front-office jobs mainly on the basis of skills.

Earnings are generally lowest in Wales and the North East of England. London, the South East and Scotland have the highest concentrations of high earners.

Sources: FSSC The Skills Bill: Analysis of Skills Needs in UK Financial Services 2007, and FSSC UK Financial Services: Five Years Forward 2006

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Regional and national skills deficiencies

Recent growth levels and clustering activity determine the development of skills deficiencies in the region. National skills surveys have revealed

  • High levels of skills gaps and shortages in Wales, Scotland, the South East and Yorkshire and the Humber. All are suffering from a long-term skills drain to London, and recent strong growth has put additional strain on their labour markets.
  • High levels of skills gaps, but broadly adequate labour supply in the Midlands and the North of England.
  • Adequate skills levels in the workforce, but high levels of labour market shortages in Northern Ireland, the East of England and the South West.
  • Broadly adequate skills levels and good labour market conditions in London. This is due to London’s ability to attract high performers from across the UK and the world, through a combination of high salaries, prestigious roles and leading employers.

Sources: FSSC The Skills Bill: Analysis of Skills Needs in UK Financial Services 2007, and FSSC UK Financial Services: Five Years Forward 2006

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