The strange case of ‘lost’ banking jobs in Britain

Are British bankers an endangered species? Almost certainly not. But are they the one on the decline? Probably.

The number of bankers in the UK is shrinking. In June of this year, the number of people employed in the financial services and insurance industry fell to its lowest level since September 1987, according to figures from the Office for National Statistics. Not only is the city dreaming of deregulation in Big Bang 2.0 to reinvigorate the sector, but employment in financial services has returned to the year’s level after Big Bang 1.0, notes capital markets think tank New Financial.

So should this be another concern for an already restless city, displaced this week by Paris as home to Europe’s largest stock market? Can.

The first thing is to put the numbers in context. Employment of financial services has not returned to pre-crisis levels. It has been hovering around the 1.1mn-1.15mn mark for most of the past decade: in this light, a dip to 1.07mn in June doesn’t look so bad. It could be temporary. If you use survey data from workers rather than industry information which is the ONS’ preferred metric, there will be no decline at all.

However, by preferred measure, there has been a clear decline since the end of 2020. After holding more or less flat since 2016, the share of the workforce employed in the sector has reached a new low of 3 percent this year.

It’s not entirely clear what triggered the slippage, except that it seems odd to banking rather than insurance or money management.

There are a number of possible culprits. Branch closures as consumers switch their banking services online is evident. Banks argue that they can redeploy branch staff, and some of the cuts will come from general automation. But the number of employees in the big banks did not see a great boom. NatWest shed 28 percent of its workforce — just over 23,000 jobs — between 2016 and 2021 as post-crisis retrenchment from investment banking and international operations combined with branch closures. Lloyd’s lost 18 percent, or $12,500.

There are also broader technological changes. Some of the functions previously performed by banks in-house will now be performed by external technology providers. The expansion of the financial technology sector may mean that jobs that were previously classified as banking roles are now technical jobs. The growth in the number of IT roles has far outpaced the decline in financial services.

Then, of course, there is Brexit. The downturn in financial services jobs rebounded at the end of 2020, when the UK left the EU single market.

Evidence shows that the direct impact of Brexit on job numbers was much more limited than expected at the time of the 2016 referendum. But, as EY’s Andrew Pilgrim points out, “job shifts between the EU and the UK are far from over.” They have become part of business as usual as both evolve like competing jurisdictions for the financial services sector.

New Financial’s analysis suggests that the UK’s decline has not been repeated anywhere else, with financial services jobs growing in the US, Canada, France and Switzerland since mid-2016 (although this was not true of Germany, Italy and the Netherlands). With pandemic employment trends muddied, it is difficult to say where the UK might lose out.

The bigger concern, argues New Financial’s William Wright, is the divergence between trends in the industry and the broader economy since the end of 2020 – what one might call “missing” UK banking jobs.

Wright estimates there will be around 91,000 additional jobs with growth in financial services employment keeping pace with the rest of the UK economy since the Brexit referendum. He argues that these are important given that jobs in financial services tend to be better paid than average, with consequences for the nation’s taxpayers.

This concern should be mitigated somewhat by the stellar growth in related professional services industries such as law and accounting. Official figures from the Nomis database show that lawyers and accountants outnumber bankers (although they are not financial service workers more broadly).

There might be cause for concern if the decline in banking jobs points to a decline in the health of the UK financial services sector in general – but that is a much broader question. More likely, as Sarah Hall of the University of Nottingham suggests, is that the numbers “fall into a broader picture of stability in financial services but not rapid growth”.

However, that may not provide much comfort to a sector seeking to reinvigorate itself and re-establish its global supremacy.

City Bulletin

City bulletin board

For a roundup of the latest early morning business news, sign up for the Cat’s City Bulletin newsletter

Related Posts

Leave a Reply

Your email address will not be published. Required fields are marked *