Scotland has a long and successful history as a major financial centre. Two hundred years ago it was the birthplace of a fledgling crop of insurance companies. The Scottish Widows Fund and Life Assurance Society, the first mutual company to be founded in Edinburgh was created in 1815. It was soon followed in 1826 by the West of Scotland Insurance Company, later known as Scottish Amicable, and then joined by Scottish Equitable in 1831 and Scottish Provident in 1837.
These days, Scotland is one of the biggest financial centres in Europe, next to London, Paris, Frankfurt, Zurich and Amsterdam in terms of equity assets and funds under management. It is known for its large banking, life insurance and pensions, investment management and asset servicing and is the headquarters for four clearing banks, including HBOS and the world’s fifth-largest bank – the Royal Bank of Scotland Group.
The insurance, life insurance and pensions sector manages more than £726bn worth of assets and with more than £580bn managed directly in country, Scotland’s investment companies have earned an international reputation for competence in funds management.
Today, more than one in 10 Scottish jobs are in financial services, with 108,000 workers directly employed in the sector and more than 100,000 in support services.
Analysts explain that Scotland’s position benefits from a proven record of being good at managing finances. It has been successful without suffering any major historical tarnish to its reputation, says Martin Currie Investment Management director of communications Ross Leckie.
He says: “Scotland has never had a single scandal. This is pretty unusual in the international arena.”
As a consequence, companies have a high degree of confidence in basing their operations in Scotland. Scottish Widows Investment Partnership is one of the biggest asset management companies in the UK, managing funds worth £97.8bn. It was formed in 2000 by Lloyds TSB as an amalgamation of four businesses – Edinburgh-based Scottish Widows, Lloyds TSB Life, Pensions and Investments located in Andover, Abbey Life from Bournemouth, and Hill Samuel Asset Management in London. But rather than transfer operations to the square mile, the company chose Edinburgh.
Swip head of human resources Lynne Dalgarno says the decision to relocate staff to the Scottish capital was partly due to its historical record in financial services as well as pragmatic reasons. She says: “Increasingly, it does not matter where you are based in fund management. Managers sit behind computer screens and travel around the world and can easily do that from Scotland.”
Leckie says that Scotland’s location, removed as it is from the noise of bigger financial centres such as London or New York, benefits financial services companies dealing with an ocean of information.
He says: “With computerisation, financial services is less about information and more about judgement.”
Employees in financial services are attracted to the region by a combination of good career prospects. With London only an hour away by plane, Dalgarno says many of Swip’s staff commute on a weekly basis between the two capitals.
She says: “Companies find little difficulty in persuading staff to move to Scotland to live and work in Edinburgh. Workers from London can be quite jaundiced by life there while in Edinburgh it can be easier to build a family and a career. The schools are fantastic and employees don’t have a lengthy commute to get to work.”
Scottish houses attract a wide cross-section of international talent, too, says Leckie, with each international employee having to demonstrate uncommon talent at what they do. He says: “Martin Currie attracts Dutch, Finnish, Chinese and even some English workers. We get people to come from Hong Kong, Singapore and Delhi not because of money. They come for the quality of life.”
He says that with numerous golf courses and cheaper housing, Scotland has many great advantages over alternative locations. He says: “Life in Scotland is at a less frantic pace than London. There is less stress, noise and distraction. Edinburgh is a calmer, better place to work. In an hour, you can be in Perthshire mountains.”
But what for the domestic Scots workforce? Alliance Trust head of human resources Steve Smith cautions Scotland will not continue to deliver world-class returns unless it employs the most talented individuals.
He says: “We must create a proposition where talent can flourish both professionally and personally. Having the flexibility to respond to a changing environment and creating a performance-led culture is key.”
It is not just asset management and the big life offices that are seeing an increase in demand for well qualified staff. In common with other parts of the UK, demand for well qualified and experien-ced IFAs, private client managers and bancassurers is buoyant with recruitment agencies reporting a resurgence in demand over the past year.
Keillar Resourcing managing director Harris Keillar says: “There has always been a mismatch between the type of candidates sought and those who apply, but that is more acute now. Firms want to recruit hunter types rather than farmers, but these are more likely to set up on their own.”
In 2005, the Financial Services Advisory Board was charged by the Scottish Executive with delivering a Strategy for the financial services industry in Scotland. According to Dalgarno, despite an initial few quiet years, the strategy has helped the board to make positive improvements already. This will help Scottish companies to further improve the quality of their own home workforces.
Dalgarno says: “In the last couple of years, we have noticed much more of a difference with the focus on training on financial capability inside schools. And if we can see an even better supply of school-leavers, we will be able to improve our own graduate recruitment streams.”
Already, the board reports that more than 3,500 financial services jobs have now been secured by inward investment and helping indigenous companies to expand.
And with the financial services industry contributing about 7 per cent to Scottish GDP at about £7bn, and growth in the sector from 2000 to 2007 at 60 per cent compared with 47 per cent for the UK, the future certainly appears rosy.