Is it overly-optimistic to expect a significant recovery in Scottish financial services next year? Can we expect another 12 months of consolidation rather than growth? Or will we finally start to turn a corner?

Here’s our considered opinion on the potential highs and lows of Scottish financial services recruitment in 2011.

2011 could be a good year for…

Investment operations

Scotland has benefited from a number of organisations looking to strip some costs out of their back office operations – so-called nearshoring. This year, Barclays Capital moved some functions to Glasgow, which will eventually create 600 jobs. Is there scope for more firms doing the same?

Alan Thornburrow, chief executive of Scottish Investment Operations, believes so: “There’s a lot in Scotland’s favour – access to talent, a strong university network, critical mass, moves to attract more people to the sector and quality office space at lower rates. A lot of these roles don’t need to sit in high-cost locations, and we hope we can capitalise on this in 2011.”

Considering his position, Thornburrow’s rhetoric is understandable. But rumours in November – that a large investment bank was scoping out a new premises in Scotland that could house 3,000 staff – add a little weight to his claim that a barnstorming recruitment drive could be on the cards.

But general expansion also seems likely, suggests Mike Stirton, associate director at Change Recruitment in Edinburgh.

“We’d expect to see expansion in the investment operations market, because of some of the Edinburgh firms have been winning new clients,” he says.

Regulatory-related roles

Financial services companies and insurance firms in Scotland are facing an uphill battle to comply with a raft of regulation – such as Solvency II, Basel III and the Retail Distribution Review. These are due to be implemented variously from the end of 2011 to 2012. This is driving hiring, suggest recruiters.

“Companies need to shore up next year and are still expanding,” suggests Mike Leeman, manager – financial services at Bright Purple Resourcing in Edinburgh. “Risk and regulatory expertise is likely to be in demand in 2011, as are compliance staff which remain hot property.”

Big Four accounting firms

The Big Four accounting firms unveiled some large global recruitment plans in 2010. Thus far, in Scotland, this has largely been restricted to restructuring and business transformation division. But, initial signals suggest that more voluminous recruitment is on the cards next year.

“The Big Four firms have aggressive growth plans for Scotland next year,” says Leeman. “This is within their consulting divisions, but also across risk, regulatory, audit and tax.”

And 2011 could be a bad year for…

Substantial employment growth in financial services

The following sentence will probably burst your bubble if you’re expecting a big recovery next year – numbers employed in Scottish financial services will increase by less than 1,000 in 2011.

This rather pessimistic projection comes from the Ernst & Young Scottish Item Club, which is expecting only a slight aggregate increase in financial services jobs next year.

“The important thing is that there we’re likely to be back in positive territory, but there will be a lot of churn in terms of both job losses and gains,” says Dougie Adams, economic adviser to the E&Y Scottish Item Club.

“There’s still likely to be some consolidation in the banking sector, but we expect the back office functions to grow. Fund managers may do well, but their small net increase in jobs won’t make a huge difference to total numbers employed in the financial sector.”

Life and pensions

Despite stating the need to cut 25%from its UK cost base, Aegon has yet to roll out a significant redundancy plan. It’s likely to be next year, therefore, before the 2,400 people employed in its Edinburgh life and pensions business discover their fates.

Aside from this, after another year of consolidation in the sector, little growth is expected in the new year, suggests Margaret Dyer, director of Joslin Rowe in Scotland.

“Aside from a few technical roles, we’ve seen very little growth in the life and pensions sector this year. Unfortunately, we don’t see this changing,” she says.

Change managers

As we’ve alluded to previously, banks in Scotland have been recruiting a large number of contractors to undertake change management programmes. Putting them in the ‘going down’ section of the article is not to suggest there will be huge redundancies, but rather that this enthusiastic hirng will slow down.

Lloyds Banking Group managing director in Scotland, Susan Rice, has said that the group is “two-thirds of its way along its integration”, while RBS’s five-year restructuring plan is now well under way.

But Leeman argues that banks will simply be changing the focus of their recruitment.
“There’s still a lot of work to be done at RBS, while the other banks will be recruiting project managers, PMOs and business analysts to implement the plans,” he argues.

“There will be more of the sleeves-rolled-up jobs next year – fewer thinkers, but more doers,” adds Stirton.