Financial services: future trends

The sector is still recovering from the recent recession and the consequences of that recession will affect it in the future. This makes it difficult to predict how large it is likely to be in the future and the size and shape of the future workforce. Nevertheless, there are a number of key drivers of change in the sector.

New regulatory frameworks have had to address significant weaknesses in business models, particularly in banking, with the need to balance a healthy attitude towards risk with the ability to innovate. At present the highly complex regulatory issues addressed may have temporarily curbed innovation in the sector, and this may drive down, to a certain degree, demand from the sector for quantitative doctoral graduates to help develop new financial instruments.

There is a great deal of work still underway in the sector on new regulations, and there is a significant gap in skills for those willing and able to effectively regulate the industry. Major trends in these areas include more transparent and less risky centralised clearing structures, and the development of IT systems that can effectively capture and audit real time trading. This has also generated opportunities in compliance and risk management throughout the sector.

Progress in information and communication technology in the last decade has paved the way for new services to be delivered online whilst ever more powerful processors help in the evaluation of complex risks. The sector is likely to continue to innovate and this may drive more demand for excellent IT skills.

The cost of labour, particularly in an environment of reduced revenue and where many employees are based in the capital, is also increasing outsourcing in the sector. At present, this is more about moving jobs out of the costly London area and into less expensive parts of the country, but there may be increasing migration of back office functions out of the UK in the future.

London's position as a global financial centre, comparable only to New York and possibly Hong Kong in size, wealth, and influence, is crucial to the continuing health of the sector in the UK, and many future challenges revolve around maintaining and strengthening that position.

With an ageing population, and consequent concern over the continuing pensions gap, pensions, retirement planning and health care insurance are growing areas in the insurance industry.

Business conditions are expected to remain difficult in the medium term for small and medium enterprises (SMEs) as the amount of capital available to small or start-up companies will continue to shrink due to the recession. SMEs are consequently looking for innovative ways to source capital and this may provide opportunities for entrepreneurial graduates.

Skills needs

The industry currently reports the following skills gaps: managerial skills; technical, practical or job-specific skills; customer handling skills; team working skills; oral communication skills; problem-solving skills; written communication skills. Doctoral graduates who are able to demonstrate these skills will have an advantage when seeking work in the sector.

The accountancy sector is specifically short of qualified accountants, and of senior finance professionals, and this is particularly acute in small business and those that operate not-for-profit or in the public sector. However, this skills shortage is attributed to the lower salaries on offer by these employers [Skills Review: Accountancy and Finance], and the demand for senior professionals may fall as job losses in the public sector gather pace.