Glasgow will repair some of the damage to Scotland's banking sector by creating another 5000 financial sector jobs over the next two years, according to an independent study.
Glasgow will repair some of the damage to Scotland's banking sector by creating another 5000 financial sector jobs over the next two years, according to an independent study.
The International Financial Services District (IFSD), launched in 2001 into a sector downturn, remains on course to achieve all of its targets by 2011, according to the results of an independent economic study.
The study, by economic con- sultants EKOS for Scottish Enterprise, says net new jobs located in the IFSD total 15,150, including 1030 in 31 retail and leisure companies, with 1.25 million sq ft of new Grade A offices completed since the launch. Most signifi-cantly, 823,000 sq ft of space was already under construction, and due for completion by the end of this year, before the property slump halted developments in cities around the UK.
Jim Watson, senior director for financial services at Scottish Enterprise, commented: "A lot of developers have withdrawn from investing in the creation of office space basically because the cost of money has gone up - the deposit guarantee banks are looking for up front is radi-cally different from a year ago A lot of the investment in the IFSD was guaranteed before the credit crunch began to bite - we are in a very fortunate position in the short to medium term."
Last month's announcement by esure of an expansion in the city to add 500 jobs to its current 610 was seized on by politicians as a sign of the sector's resilience in the face of the banking meltdown. It added to confirmation in January by BNP Paribas that it would continue with plans to recruit a further 80 staff in the district.
"The IFSD is not dependent on one or two areas of the financial services industry," Watson said. "It has attracted a wide cross-section of financial industries and functions and many of these, such as general insurance, are less cyclical and better placed to withstand the current situation Within banking there may be winners and losers, and some sub-sectors of banking life and pensions are talking about growth and acquisition, some about consolidation"
Five big banks Barclays, Abbey, Lloyds, JP Morgan and Morgan Stanley employ almost 6000 in the IFSD, with insurers DirectLine, esure and Churchill contributing another 3000 jobs, and the Student Loans Company and Shell Shared Services adding 2000. Another 930 jobs have come from BNP Paribas, ACE Insurance and pensions consultants Hymans Robertson and Aon.
The only major job losses in the IFSD era have been 680 at Abbey, 200 at Goldfish and 100 at Mortgages plc.
Glasgow's stock of new offices was critical, Watson said. "What we have found is that if you have got a product where they can touch it and walk round it, get a feel for it, you have got a much better chance of letting a building to a new investor. Glasgow has been fortunate in that developers have the confidence to carry on - although the general feeling is confidence has dropped there is not a lot of evidence of planned investment being stopped."
However a number of projects in the pipeline have been stalled, and are not included in the 823,000 sq ft stock.
Late last year Glasgow city council, co-promoter of the IFSD, launched a "buy now pay later" offer for developers, to underpin land buying costs and help cashflow.
Watson said: "Many of the major financial institutions are taking the opportunity to review their operations in the UK. The outcome is often consolidation of operating centres or possibly outsourcing." Glasgow would expect to offer a 40% to 50% cost saving on London in operational efficiency. "When you have got a difficult climate, driving cost out and getting value for money become important factors."
But he said the IFSD's track record on quality was critical. "You have got to have confidence you can move to a location where you can get labour at a more affordable cost and reduce overheads at the same time as delivering quality of service to customers."
On perceptions that Scotland may be losing higher value jobs around bank headquarters and gaining only call centre type operations, Watson said that the newer jobs created by the likes of JP Morgan and Morgan Stanley were in the £35,000 to £50,000 bracket, helping to boost the average salary level in IFSD jobs created since 2006 to above £27,000 - twice the typical call centre rate.
"We attracted a lot of call centre type work into Glasgow in the beginning, and that in many ways has built a foundation for allowing us to pitch for jobs further up the value chain You could argue there is less vulnerability around the high value."
The strategy of building relationships and skills within the sector will be underlined today when Trevor Matthews, the former Standard Life director, now chief executive of Friends Provident and president of the Chartered Institute of Insurance, opens the institute's first UK study and reference centre within the Mitchell Library, Glasgow, with support from the council and Scottish Enterprise.
Councillor Steven Purcell, leader of Glasgow City Council, commented: "It would be difficult to argue that Glasgow will remain immune to the difficulties being faced globally in the financial services sector but equally, we believe it is reasonable to say that Glas- gow is well placed to withstand the rigours of the current economic circumstances.
"In addition, the city is in a strong position to benefit from the eventual upturn in the sector's fortunes given the broad spread of financial services provided in Glasgow. It is also important to stress that the IFSD is a long-term project and the commitment is there to see it through and realise the aspirations set out in 2001."
