Scottish financial services sector offers voice of caution for 2008

Despite over half Scotland's financial services employers signalling their intention to recruit in 2008, confidence in the year ahead has actually dipped to levels not seen since the end of 2002.

Over 75 financial services companies in Scotland contributed to research during November 2007, designed to gauge perceptions amongst some of the most influential employers in the sector. Whilst the majority of firms (76 per cent) described their company's level of business confidence for 2008 as "optimistic" or "very optimistic", this is the lowest level recorded since 2003 (also 76 per cent), whilst 3 per cent expressed a pessimistic outlook. There has also been a spike in the number of firms expressing neutral feelings for business prospects in 2008 - from 13 per cent in 2007 to 21 per cent this year.

Fifty five per cent of firms expect to increase their permanent employee numbers in 2008 compared with last year's figure of 59 per cent, however both results are considerably lower than the 82 per cent predicting recruitment back in 2006.

The annual study, which has run every year since the Millennium, was conducted by Joslin Rowe Scotland, the financial services recruitment specialist and supported by Scottish Enterprise.

The main findings of the Joslin Rowe Review are:

• The investment operations sector/asset administration sector showed the widest spread of opinion on business prospects for 2008 - ranging from pessimistic, neutral to very optimistic.
• The median rise in staff numbers is expected to be up 5 to 10 per cent in 2008, predominately across investment operations, life and pensions and insurance.
• 9 per cent of firms expect to cut headcount. This is six percentage points higher than 2007 but broadly in line with survey results over the last 8 years.
• Cuts are most likely within the Edinburgh life and pensions community.
• On average, between 2 and 5 per cent of employees, within firms based in Scotland, are from the EU, Australia and New Zealand. But some firms are filling up to 20 per cent of their vacancies from overseas talent.
• Most financial services workers can look forward to a 3 to 5 per cent pay increase in 2008. Although accountants, settlements professionals and those in investment operations can expect between 15 to 20 per cent more.
• Just under half (46 per cent) of companies expect to improve their benefit packages - although 10 per cent did make cuts to pension provision in 2007.
• Directors can expect to earn £80,000 plus and 20 to 30 per cent bonus, managers £50,000 to £59,000 and 10 to 20 per cent bonus, team members £15,000 to  £19,999 and 5 to 10 per cent bonus with trainees earning £10,000 to £14,999 and 2 to 5 per cent bonus.

Margaret Dyer, director, Joslin Rowe Scotland believes: "If Scotland is to be a strong player, on a big stage within financial services, then we have to shoulder our share of global fluctuations. After a turbulent end to the year across the world's economy and FTSE instability, it can only be expected that employers in Scotland remain cautious for the year ahead. Our survey was conducted in November during the height of the sub-prime fall out and I wonder what the results would show if we were to take the temperature of the market this Spring? So we shouldn't sound the death knell yet. There is also encouraging news. Just over a quarter (28 per cent) of organisations say they will be recruiting for a greater volume of strategic roles than in previous years, our survey showed bonuses are increasing and some sectors, such as the investment banks, have signalled headcount growth of up to 30 per cent more."

Cathy Malone of the Scottish Enterprise Financial Services Team added; "Financial services continues to be a real Scottish success story and the vast majority of firms are still optimistic about the year ahead, despite tougher trading conditions. Indeed, last year we welcomed the arrival and expansions of a number of successful international companies including BNP Paribas, Barclays Wealth Management and Morgan Stanley who view Scotland as a country with the available skills, talent and opportunities to help their operations to grow long term.

"2007 also witnessed significant changes in Scotland's governance and we are very pleased that the new Scottish Government has given its full ministerial support to the Financial Services Advisory Board (FiSAB), the custodian and advocate of the strategy for the Financial Services Industry in Scotland."