City of London corporation Supporting the Financial and Related Professional Services (FRPS) sector to access the skills it needs for future growth 27th January 2017 Author: PA Consulting

The UK is the undisputed global centre for financial services and a leading provider of related professional services. The City of London is at the heart of this… £85-95bn in tax revenue in 2016 2.2 million employees 1st In the Z/Yen Group’s 2016 ‘Global Financial Centres Index’ UK UK London £55,393 Average annual pay rates (compared to £28,213 across the rest of the UK) The City 750,000 employees 250,000 employees (predominantly in front-end business functions)

…but skills gaps and shortages threaten the FRPS sector’s growth prospects Skills gaps are skills lacked by employees already within the industry Skills shortages are jobs which cannot be filled from the available pool of applicants 16% of FS firms report skills gaps Technical gaps: e.g. Programming and broader technological skills; a detailed understanding of compliance Soft-skill gaps: e.g. customer handling skills; time management; team-working Technical shortages: e.g. advanced ICT skills; cyber security technology; actuarial and underwriting skills in the insurance industry. Soft-skill shortages: e.g. ability to persuade or influence others; sales 4% of FS firms report skills shortages 2013 2015 83,800 6,600 2015 2013 36,400 Number of skills gaps in the FS sector Number of skills shortages in the FS sector 2,800 Skills gaps have declined by 57% since 2013, with FS seeing the biggest decrease in skills gap density of all sectors Skills shortages in the FS sector have risen sharply (doubling as percentage of all vacancies, from 10% to 21% between 2013-15)

Several key issues cause skills gaps and shortages Lack of foresight on future skills needs Lack of agility in skills provision Fewer people are attracted to working in the FS sector due to negative perceptions and a lack of awareness of alternative routes into the sector A changing world Tightened regulatory environment Brexit Automation Little evidence of businesses and skills providers in the FRPS sector taking a joined-up approach to identifying and tackling future skills needs. This short-term approach does not take into account changing business structures and market needs Statutory skills providers are slow to respond to employer needs. While larger employers have historically responded by paying a price premium or providing in-house training, SMEs are struggling to access the talent they need to grow Business graduates no longer view FS as the top career destination of choice and the proportion of graduates entering this sector has declined since 2006. Apprenticeships (inc. higher and degree apprenticeships) in FRPS are in their infancy Technological advances, the rapid increase in high-growth SMEs, millennials’ emphasis on the importance of high quality L&D, and the tightening regulatory environment – combined with the implications of Brexit (11% of FRPS employees are EU nationals)

There are many examples of effective interventions to tackle gaps and shortages, but certain companies (i.e. SMEs) are unable to navigate the landscape or respond as other larger businesses do Accredited programmes for more experienced workers to up-skill Traditional degrees in subjects related to FRPS Degree apprenticeships In-house and outsourced provision (as shown by increased L&D budgets) Recruiting talented graduates and apprentices, as well as retraining more experienced workers Recruiting from overseas and paying a significant salary premium Skills Providers Employers The Government ‘s Apprenticeship Levy (April 2017) and the National College for Digital Skills The London Economic Action Partnership (LEAP) takes a strategic approach to skills provision and growth The National Skills Academy for Financial Services (NSAFS) provides employers with training and development Membership bodies, such as TheCityUK, which lobby on the sector’s behalf Quangos, such as the UKCES (now abolished), which analyse current and future skills gaps and shortages Other stakeholders