Increasing regulation (perceived to reduce innovation) combined with job insecurity and stricter remuneration structures are causing a brain drain in financial services. Meaning, the best and the brightest are now choosing start-ups, technology and other sectors –the chance to innovate and build business– over banking.
What does this realistically mean for the industry? In the short term, it is unlikely to be meaningful. Banks are consistently in the news cutting jobs, and reducing costs. Simply said, an exodus is apparent. In ten or fifteen years down the road, however, a lack of people will exist to step into executive and strategic positions.
On the other side, many argue there has been too much innovation in financial services. A brain drain, whereby the “creative” use their talents in other industries, and leave more conservative individuals in finance, is welcome.
Yet, we must remember that financial services currently:
- Account for 14.5% of UK economic output
- Offer a combined total of 63bn GBP in tax
- Have a 47.2bn GBP trade surplus; larger than all other net exporting UK export industries
If the industry continues to contract a lack of talent in the future will mean an even greater decline in the economy. We are currently on the cusp of our third recession in four years. If top talent continues to leave finance (or choose to not enter in the first place), how can we drive growth?
We must consider that the movement of talent to other industries is unlikely to lead to an equivalent gain for the UK economy. Digital Shoreditch, for instance, cannot compare to Silicon Valley. Graduates are frequently choosing to move to other countries, where VC funding and government grants are easier to obtain. Additionally, if talented individuals leave the financial sector, what guarantee is there that those who will remain will act in a more conservative manner? Perhaps we will be left with a group of individuals who are unable to manage risk entirely.
Talent should remain in financial services – an industry where infrastructure is already developed and the UK is a recognized global leader. Policy makers and bank officials must begin to address issues of worker outflow now before it is too late.