Financial Services: UK Economy

Published date : 09 December, 2021
It is a pleasure to follow the hon. Member for Bromley and Chislehurst (Sir Robert Neill), who speaks with great knowledge on these matters at all times.

Like the hon. Member for Hitchin and Harpenden (Bim Afolami), I started my working life in financial services. I started out working in the small but perfectly formed share registrars department of the Bank of Scotland, which was taken over by Lloyds TSB. I swiftly moved over to work for Scottish Widows, which, a few months later, was also taken over by Lloyds TSB. I decided that, since Lloyds TSB was clearly so keen to have me on its payroll, it would be churlish not to spend at least the next few years working for them, so that is what I did.

I started out in what was called the quality assurance department. We talk about the diversity of jobs in financial services. In plain English, it would have been better described as the complaints department because, if you wrote a letter or phoned up demanding to speak to the chief executive because your pension fund was not performing quite as well as you anticipated, you spoke to me, or somebody like me, in that department. I am not entirely certain whether it was good training or not for being a Member of Parliament and a councillor, but I have never felt the worse for the experience.

Each day, my colleagues and I went in to provide products and services for a wide range of people, at all different ages and stages of life, as they tried their best to prepare, hedge and insure for various happy, not so happy and inevitable events that we all encounter in our lives. We were not alone in that in Edinburgh because Scottish Widows was one of many life insurance and pensions firms in the city, a legacy of the more than 300 years of Scotland being recognised as one of the leading, most innovative financial centres in Europe.

That industry could not, and would not, exist if it was not for the high quality of life that people can enjoy outside work, for the quality of the public services that underpin that quality of life, and, as the hon. Member for Bromley and Chislehurst said, for the significance and importance of our professional services that underpin the sector. It could not survive if it was not for the support of Government and the quality, experience and adaptability of the workforce. We should not be in the least bit shy about saying that; we are exceptionally good at this and we should advertise that and remind ourselves of it regularly.

Scotland is the second largest financial services cluster in the UK outside London. Financial services are also one of the largest sectoral contributors to the Scottish economy at 9.4% of gross value added, which is equivalent to £13 billion. It employs more than 160,000 people directly in financial services and the related professional services; that is nearly 6% of Scottish national employment. Financial services also represent a disproportionately high share—25%—of UK employment in the life assurance sector and 13% of all banking employment. Together with the professional services sector, that accounts for 40% of Scotland’s services exports. The industry has disproportionate scale and scope.

Another emerging area is FinTech, in which Scotland is also emerging as a leader second only in scale and scope to London—again, we are the second largest outside London. The Financial Services Advisory Board, chaired by Scotland’s First Minister, established the need for an independent organisation to try to maximise the FinTech potential in Scotland. It provided £250,000 to try to leverage additional business contributions and academic contributions to achieve the goal of having Scotland in the world’s top 10 recognised international FinTech clusters.

FinTech is a tremendously exciting development. It is certainly a disrupter, but it is also an enabler. This is part of a landscape on which we have trodden with confidence for centuries. We have centuries of experience and a reputation in this fast-moving environment for probity, trustworthiness, quality and excellent performance, but it is all founded on people and their skills.

In that regard, Scottish Financial Enterprise’s five-year strategy, launched earlier this year, takes on a particular importance. It has four key objectives, including leading us on a journey to net zero, inspiring global leadership in green finance and supporting the transition to net zero. It sees a role in supporting our financial recovery post pandemic. It is about responding to changing customer needs, delivering innovative and, above all, inclusive products that meet the evolving needs of all customers. And to go back to the point made well by the hon. Member for Hitchin and Harpenden, it is also about delivering skills and inclusion, enabling financial services firms to recruit, develop and retain that pipeline of talent and high-performing, diverse skills that we need to continue with a successful industry.

These are challenging times on a number of fronts for the financial services sector, whether on an economic level, a political level or simply a regulatory front. I am reminded, however, of the history of the organisation that I went to work for, Scottish Widows, which was founded out of the tumult of the Napoleonic wars. Although I am sure that we would all very much prefer never to go back to that sort of degree of conflict and tumult, nevertheless, financial services have shown themselves to be remarkably adaptable and able to rise to the challenges that they face, whether that means meeting their customers’ needs and expectations or dealing with the world around them.

We may have a head start in financial services, but there is nothing to guarantee that, unless we continue to invest, innovate, and above all, talk up the provenance and importance of this vital industry.

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