FFS0034

Written evidence submitted by the Financial Services Skills Commission

The Financial Services Skills Commission is an independent, not-for-profit member organisation that aims to increase and diversify the supply of talent into the UK financial services sector. The creation of the Commission was a key recommendation from the work of the Financial Services Skills Taskforce launched by former Chancellor, the Rt Hon Philip Hammond MP. The Taskforce identified the impact that new technology, demographic change and globalisation has on the UK financial services sector.  The Taskforce’s final report was launched by Economic Secretary to the Treasury, John Glen MP in January 2020 and announced the creation of the Financial Services Skills Commission.

The Commission represents 24 firms and includes members from banking, insurance, asset management and fintech, collectively employing around 300,000 people in financial services in the UK.

We work with our members and a diverse network of stakeholders to address the major issues affecting skills in financial services. Through four workstreams, we are working to:

1. Invest in our people and work with them to develop new knowledge, skills and behaviours
2. Understand current and future skills gaps and set out a future skills framework to align firm and sector efforts on reskilling and upskilling
3. Increase awareness, widen access and attract talent to work in the sector
4. Power diversity, inclusion and progression of all talent in the sector

By collaborating with businesses, government, regulators, professional bodies, training providers, and the education sector, we seek to create solutions together, that work for all stakeholders involved.

We are responding to this enquiry as our work with our members and the wider industry provides us with a unique viewpoint to the activities and position of financial services firms with regard to talent and skills.

Background to the skills challenges in Financial Services

We welcome the opportunity to respond to this inquiry on the future of financial services.  A supply of people with the right skills and talent is essential to the future success of the UK’s financial services sector which employs 1.1 million people, the majority of whom work outside the M25.

In recent years, firms have been disrupted by the speed of change in technology and data; by globalisation; changing workforce demographics; and in 2020 by Covid-19. Firms have met these challenges through a variety of mechanisms but continue to struggle to find and retain the right talent for an increasingly digital and technology driven industry.

Technology, digitisation and data have transformed the way FS firms do business, changing customer behaviour, resourcing requirements and firm priorities. Technology has changed the physical footprint of businesses and the way businesses interact with customers. As a result, it has changed the roles of our people and the skills and capabilities they need to do their jobs. 

Automation is changing the makeup of jobs across organisations and job roles, releasing people and time from simple tasks, to undertake more challenging, less repetitive work.  Data security is central and cyber threats present a real risk to firms which requires a response at all levels and across all aspects of the business. As a result, jobs in cyber security, data management and technological security are required at a much higher frequency, as these roles enable firms to better manage risk.

Additionally, customer service and relationship management roles have transformed as more customers complete simple banking processes online and through mobile applications, and the UK has reduced its reliance on cash. This has changed the way customers expect to be engaged and communicated with and created new roles in digital marketing and communication as this becomes a priority for firms.

The emergence of challenger banks and fintech is reshaping what is possible and we will continue to see innovation of new services and products built around data and digital access. There is a reduction in the requirement for some more traditional processing job types.

Globalisation has had a big impact on UK FS, which has traditionally recruited talent from across the world and been able to offer attractive renumeration to secure the skills it needed. As the UK transitions to a new relationship with the EU, firms will need to increase recruitment from the domestic workforce. They will need to innovate and enhance their training offer to ensure they have the talent and skills they need for the roles of the future. Although the pandemic has highlighted the possibilities of how remote working can enhance access to a global and UK-wide talent pool, it also introduces questions around supply chain dependencies and meeting talent needs onshore.

Changing workforce demographics are also impacting the sector. Life expectancy has increased, changing the demographics of the UK workforce, as workers are staying in role for longer and looking for greater flexibility in their career. For those beginning their careers, many are looking for non-traditional routes into work such as apprenticeships and are increasingly interested in organisational purpose, culture impact and sustainability when considering future employment. Additionally, younger workers are increasingly appreciative of the global issues in terms of society and the environment, and organisational purpose. The FS community recognises this as both a threat and an opportunity, if it fails to demonstrate commitment to purpose, it will fail to secure critical talent, if successful, firms will attract the best and brightest.

With changes in workforce demographics, we need to continue to ensure our workforce is diverse and representative of the customers and communities we serve, in addition to reflecting their socio-political aspirations.

These megatrends are all impacting on the FS workforce and every job role will be affected by these trends to a greater or lesser extent. The augmentation of jobs roles and tasks is already happening and will continue. This will impact on:

• Firms.  Firms increasingly require their people to have an enhanced mix of interpersonal, technological and industry skills, knowledge and behaviours.  This requires strong reskilling and upskilling programmes to ensure they have access to staff with the right ‘blend’ of skills.  The knowledge and skills of our workforce are our greatest asset, but as job roles evolve, investment in training and development will be a critical component of overall talent management. 
• Those already working in the sector. Individuals will need to invest in their own reskilling alongside support from their employer. This will enable individuals to sustain their career in the face of change and ensure their skills are relevant for the future.
• Those entering the sector for the first time. It is important that the sector does more to attract people with the right skills at all levels to join the sector, especially those from diverse backgrounds and provide a variety of routes and opportunities in. The sector also needs to raise awareness of the variety of skills and experience from other sectors that are transferrable, as well as educating those making career decisions about the variety of roles in the sector. The sector needs to provide compelling reasons to join the sector and develop its value proposition and narrative around organisational purpose.
• Education and training providers. By setting out the future skills needs of the sector, we can work with training and education providers and Chartered Professional bodies to understand these needs and adapt to them.  Employers will increasingly look for a wide range of provision, content and delivery methods to support an agile approach to reskilling that builds on the existing capabilities of individuals.
• Government.  Whether at a national, regional or local level, government should partner with the sector to support efforts to reskill and upskill and support the sectors ongoing success.

Answers to specific questions

‘What skills and immigration policy will the UK financial services sector need once the UK has left the European Union?’

The priority for skills policy must be to support and enable growth of domestic talent and to reduce the reliance on importing talent from overseas. Government immigration policy should enable flexible hiring to fill skills needs from those with settled status and the legal basis to defend this.

Issues such as Brexit and Covid-19 are disrupting how firms access talent.  Government skills policy can facilitate the development of home-grown skills and talent to ensure businesses have the human capital they need to prosper in the short and long-term.

Our work with businesses demonstrates that the skills most in need are a combination of technical skills and soft skills. We have identified acute skills gaps and problems recruiting talent in the following eight areas: machine learning/AI, agile, cyber security, user experience, team working, relationship management, adaptability and empathy.  At the Commission we are building a common skills framework for each of these skills, setting their components and how they align to job functions in the sector.  We are also undertaking work to identify other skills that are emerging as priorities for the sector which will then be added to the skills framework.

Technology has enabled the operational resilience of the sector through the Covid-19 pandemic and the sector transitioned well to home-working. Our research found the number of FS staff furloughed peaked at 4%[1], and 78%[2] of workers reported that they could do all or most of their job from home. Prior to the pandemic, FS organisations were well on the way to being digital first, however our research indicated that the skills needs of workers have changed during the pandemic, and continue to evolve as a result of homeworking and increased digitisation.   Training and skills policy will need to respond rapidly to address this evolution.

Government can support the changing skills landscape in FS by supporting employers with efforts to reskill and upskill their workforce.  In particular:

• Boosting the availability of high-level digital skills across the UK workforce to address skills shortages in priority skill areas such as machine learning/AI, agile, cyber security and user experience.  Training in these areas needs to be available through a range of mechanisms and course types which are available at all levels and across the UK.  This should include not only undergraduate courses, but routes such as Apprenticeships, T-levels, vocational routes higher level qualifications, adult learning and professional development to ensure all adults can access government supported programmes to develop their digital skills.

• Ensuring use of apprenticeship levy-contributions are easily accessible for FS firms and their supply chains to utilise in areas of skills gaps and future need. Increased flexibility in the use of the levy and the qualifications and training that can use levy funding would allow firms to retrain and upskill staff in a more agile, rapid and flexile manner.

• Ensuring apprenticeship standards align to the technical and behavioural skills needs of the sector so that businesses are easily able to invest in developing the skills that they need. This should include the introduction of modular apprenticeships that cut across skills areas, such as financial services and digital. This flexibility would allow firms to develop the full skill set they need, reducing the challenges of working with apprenticeship standards that do not fully align with business needs, and have a positive impact on social mobility.

• Support the sector in its efforts on reskilling and upskilling so that it increases its level of investment in training and development and creates home-grown talent to address existing and forecasted skills gaps. This can include:
• Reducing the amount of mandatory training firms need to deliver to employees
• Support our development of a future skills framework for the sector. As technology changes the ways firms work and do business, they need a system-wide response to learning and development. The skills framework will allow firms to better identify and address skills gaps, tailor their training programmes, and match training providers and materials to skills needs.
• Develop mechanisms to support the portability of skills through common accreditation.
• Government working in partnership with the industry to reinforce positive messages about the industry, at home and abroad
• Ensure adult skills provision and the lifetime skills guarantee meets the needs of employers by prioritising the skills in our future skills framework. 21% of employees (over 270,00 people)[3] employed in the sector hold a qualification no higher than a GCSE.  By working with employers to support upskilling, we can help to ensure these individuals develop skills relevant for the future.
• Increase delivery of the levelling-up agenda and work with businesses to retrain staff across the UK. The FS sector employs over 600,000[4] people outside of London, across the UK regions and nations. By working with employers to invest in retraining and upskilling we can target support across the UK geography and improve efforts to level up.

‘How can Government policy and the UK regulators facilitate the emergence of FinTech and new competition; develop new areas of growth for the financial services sector; and promote the UK as the best place to incubate new financial technologies and firms?’

As changes to immigration policy will affect access to international workers (EU and non-EU), FinTech firms want to ensure they can secure the right talent to maintain business continuity and growth. These firms will require smooth immigration procedures for skilled overseas talent and better training and development of UK talent.

FinTech firms can be supported through simple-immigration procedures for highly skilled workers and easy access to European and other markets. FSSC has been part of the Fintech Strategic Review led by EY and City of London Corporation and we endorse the recommendations of the skills chapter of this report.

The pandemic remains a huge challenge FS firms who are uncertain about their ability to access the skills and talent they need. We are keen to support to support the Treasury to develop this work on the future of FS and are available to discuss these issues in further detail.

Yours sincerely,

February 2021

Financial Services Skills Commission, Fitzwilliam House, 10 St Mary Axe, London, EC3A 8BF

www.financialservicesskills.org                info@financialservicesskills.org                 020 3696 0131