The Scottish financial services market continues to flourish and prosper at a rate which has exceede...
The Scottish financial services market continues to flourish and prosper at a rate which has exceeded everyone's expectations.
The last 12 months has seen Scotland propel itself into the top echelon of Europe's big performers in fund management.
The combination of Edinburgh's and Glasgow's success has pulled the country into fifth place in the European league tables, with funds under management expected to total in excess of £330bn by the end of 2000.
Two years ago it was a different story. The press was abound with stories about the demise of the Scottish fund management market and the financial world was pessimistic about its future.
However, a series of mergers and acquisitions, and the increased flow of new business assisted by an aggressive marketing strategy, have helped turn the situation on its head.
The acquisition of NatWest by Royal Bank of Scotland and the integration of Scottish Widows into the Lloyds TSB group has meant that two financial giants now have their headquarters based in Edinburgh.
Likewise, the Britannic's takeover of Brittania led to an additional £10bn of the group's funds being moved to Scotland and a similar inflow resulted from Aegon's takeover of Guardian's life and pensions business.
Australian financial services group Colonial has also acquired a majority shareholding in Stewart Ivory, the independent Edinburgh-based investment management company. The new entity, to trade as Colonial Stewart Ivory, will keep its base in Edinburgh, with over £3bn funds under management.
Mergers and acquisitions are not the only reason for Scotland's booming fund management industry. New business is being won and the strong economy has sustained fervent market growth. Baillie Gifford, for example, attributes its success to the increased business it attracts. The total of its funds under management has increased by £21bn over the past 14 years.
This is obviously good news for the future of recruitment in Scotland, with an additional 1,000 jobs created by the inward investment over the past year and still more expected over the coming months. More and more major institutions are setting up base in Scotland and expanding their back office functions.
The trend for acquisitions looks set to continue and there seems no end in sight to the continued growth of the market.
Employment opportunities within financial services in Scotland are now outstanding. State Street recently announced plans to add 100 jobs to its Edinburgh operation, following the acquisition of new business.
Deutsche Bank has also announced a major development in Scotland. Some £30m is to be invested in building new offices and 500 new jobs are to be created. The Bank of New York has also promised future growth which will undoubtedly lead to the creation of new jobs.
In a bid to combat the expected skill shortage, a number of initiatives are being devised to encourage young people to pursue a career in finance.
The government, for example, has launched a pilot project, led by the Bank of Scotland and Lothian and Edinburgh Enterprise Ltd, with many major players from the industry involved, to assist the unemployed with re-directing their careers.
E-Commerce is a major growth area, which is expected to again increase the flow of funds to Scotland and create more jobs.
According to a survey by the SFE, Scotland's financial institutions will spend in excess of £600m on e-commerce and related IT projects over the next three years.
Financial services is quickly realising the power of the web, with more and more funds being channelled into the development of Internet strategies.
On the private client side, UBS are in the process of establishing an e-commerce business, which they believe will re-define the way they provide service to their customers.
Scotland is also a hugely popular centre for European financial customer services, and the presence of call centres continues to multiply. According to recent research by Deloitte & Touche, a total of 88 call centres were opened in 1999, creating 6,300 new jobs in Scotland alone.
Financial services were the second largest creators of call centres, just behind mobile phone networks, and a massive 50% of the centres in Scotland were established within the boundaries of Glasgow's city centre.
In March, the Halifax internet bank, rebranded as Intelligent Finance, stated it will be employing 1,700 professional staff in a call centre near Edinburgh.
While the increased flow of funds, mergers and acquisitions and the general expansion of back office functions have been the driving forces in the turnaround in Scotland's fortunes, we should not ignore the global marketing initiatives which have underpinned the success within the Scottish market.
Good performance alone is not enough to make a company's name and the importance of the marketing function is finally getting the recognition it deserves. The demand for marketing professionals within financial services is certainly on the increase, and salaries are rising in line with this.
A recent CBI and PricewaterhouseCoopers survey revealed Scottish financial services firms are increasingly optimistic with regard to their business situation. This is hardly surprising, given recent activity.
Strong performance, acquisitions, even reverse acquisitions and an increased flow of funds have all contributed towards making Scotland a force to be reckoned with in the finance world. Add to this the fact that Scotland has a lot to offer in terms of quality of life, it is now rightly regarded as a prestigious and diverse place to be.
Lynn Muirhead is Director of Joslin Rowe Associates (Scotland) Ltd
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