Scottish financial services in numbers
100,000 people directly employed 100,000 people employed in support services +7% of total Scottish employment £8 billion for the Scottish economy each year £800 billion in funds managed
Employing some 100,000 people and that figure again in support services, Scotland’s financial services sector is nothing short of vast. It’s one of the country’s biggest sectors, generating around £8 billion for the home economy each year. Scotland is fast becoming home to some of the most exciting players on the financial technology (or ‘fintech’) scene and Edinburgh, the UK’s largest financial hub outside of London, lies at the heart of it all.
The charge is not new; indeed, Edinburgh’s financial services history dates back centuries, specifically to the establishment of The Bank of Scotland in 1695. Set up to support the growth of Scottish business, the bank placed Scotland on the financial map of the UK despite competition from London. It saw the introduction of paper money in Scotland; it opened up the opportunity for trade south of the border; and it coincided with the Town Council of Edinburgh’s decision to launch an architectural competition which reinvented the city for the modern world: the New Town.
Scotland was soon prospering financially and Edinburgh was at the forefront. “Through the centuries,” says Graeme Jones, Chief Executive of the Scottish Financial Enterprise, “our financial scene has played a huge part in the fabric and prosperity of Scotland as a whole.”
It’s not just banking which constitutes this renowned heritage though: the increase of international trade during the 1700s led to a requirement for marine insurance for many Scottish export and import companies. A growing demand for life insurance also followed, something which Graeme is convinced harks back to the Napoleonic Wars: families of soldiers needed somewhere to put down premiums in anticipation of the worst. The most evident reminder of this legacy remains a key presence in Edinburgh today: Scottish Widows, established in 1815 to service those very families.
And this isn’t all. The investment trust movement, which grew up during the 1870s, was pioneered by Scotsman, Robert Fleming. Although somewhat overshadowed by his grandson Ian, Robert’s contributions were to the finance industry what his grandson’s were to the world of spy fiction. Operating out of Dundee, Robert saw the massive profits being made by the owners of the city’s jute industry and realised that they needed somewhere to invest. It was a model that would soon take off in the rest of the country.
With every new development in Scottish financial services necessary infrastructure came into being. The legal profession, the accountancy profession, academic institutions, all became crucial to the industry and its lasting success here in Edinburgh. “It’s clear to see,” says Graeme, “that the origins of the Scottish financial services industry aren’t predated anywhere in the UK. As we started to export and import, our home-grown economy started to grow.”
Scotland’s fintech capital
Now, more than three centuries on since its inception, Scottish financial services exists as one of the biggest sectors in the country, and Edinburgh has been quick to adapt to the times. Investment in the development of new, innovative financial models such as e-commerce and mobile banking has been soaring in the UK; as George Osborne states in a recent Government publication, “I want the UK to lead the world in developing fintech. That’s my ambition – short and sweet.”
London has inevitably become home to much of this but as the Government also explains, the city is a gateway to prospering fintech hubs all over the UK – and Edinburgh is the biggest, specialising in insurance, pensions, investment management and auxiliary services. The technology underpinning this status is necessarily second to none.
From Swiss banking software developers Avaloq to Aquila Insight, specialists in predictive analytics, Edinburgh’s not just riding the fintech wave, it’s driving it. “Many of these companies are rapidly expanding their research and development facilities here in Edinburgh and that’s creating immensely high quality, highly skilled jobs,” says Graeme. “A lot of digital development has always been required to be set up in city heartlands but Scotland is as well placed as anywhere in the world to capitalise on this.”
And in many respects it is already doing so. Edinburgh’s myriad strengths in the financial services industry as a whole continue to expand as more and more companies enter the fold and more traditional institutions begin riding the fintech wave. The UK Green Investment Bank, established in 2012, is one of the city’s jewels of start-up innovation, along with private bank Hampden and Company. Edinburgh is also one of the main centres for asset servicing in the whole of the UK. BlackRock, Citi, JP Morgan, Bank of New York Mellon, HSBC and State Street – all are operating out of Edinburgh, processing billions of pounds worth of transactions every day and contributing to the city’s success in the sector.
A fertile hub of success
While it’d be wrong to say that Edinburgh-based businesses don’t have to command good salaries, the city has the ability to attract the kind of people who may otherwise work in London – and at a lower cost. Furthermore, as Graeme highlights, property prices are more attractive, amenities are more available and the quality of life really is second to none. “I think our capital city provides a very, very attractive proposition for young people to join a Standard Life or an RBS, to start building their careers and to go right to the top.”
The city also has an international and diverse skills base. “If you were looking to recruit an actuary, I cannot think of a better place than Edinburgh,” says Graeme. “Likewise, if you’re looking to recruit someone to go into retail banking, you’ve got a readymade pool of labour here.” Add to this the city’s first-class academic institutions, its tier-one legal and accountancy professions as represented by the likes of PricewaterhouseCoopers and EY (Ernst & Young) and there’s a perfect storm for fintech to thrive.
“Despite 35 years working in financial services I have been very, very pleasantly surprised at how Edinburgh is taking a lead in fintech,” says Graeme. “There’s so much to be excited about by the city’s financial organisations. The ones I’ve mentioned are going to be the organisations that will become our big employers in the future. Not all will grow and expand to become huge, but you’ve got to have a healthy pipeline of new organisations starting up.
“There’s obviously much more work to be done but we are so well placed; we’ve got the history, the heritage, the academic institutions, the large companies and the diversity, and so there’s no earthly reason why we don’t continue to thrive vigorously in the future.”
Three fintech firms to watch in Edinburgh
What: An online money management platform which gives users full control over their finances by showing exactly where it goes, allowing for greater personal financial planning
What: A revolutionary ‘digital passport’ which uses bank security to verify online identity, making transactions and trust building around the world faster and easier.
Name: Aquila Insight
What: A data analytics consultancy firm which counts Sony and Royal Bank among its clients. Focused on extracting value from data and translating it into decisions, enabling better financial actions.