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Why yet more financial services development work is going to Scotland and Ireland rather than Asia

To many financial services technologists working for banks in London, the prospect of moving to Scotland, Ireland or more provincial areas of the UK may not be too appealing. However, with more IT roles being ‘near-shored’ rather than shipped to far-flung locations, there’s likely to be a steady stream of work.

A recent example of this trend is Swiss banking software firm Avaloq, which is creating 500 jobs in its new Edinburgh-based development centre. The firm had considered basing the Philippines or Brazil, but a supply of “skilled, hard working” employees north of the border swayed the firm to choose Scotland.

“Edinburgh and Scotland generally is something of a hot spot for technology talent,” says Nigel Roxburgh, managing director of outsourcing firm SourceGene.

The likes of Morgan Stanley, Barclays Wealth and JP Morgan also have technology centres in Glasgow, Citi and Fidelity have IT operations in Ireland and JP Morgan also carries out development work in Bournemouth.

Invariably, these decisions to base a development centre in cheaper, but close to home, locations involve some sort of regional assistance grant as enticement. The Scottish government contributed 1.74m to Avaloq’s 15m investment north of the border – or a contribution of 3,480 per job created. However, cost isn’t the only consideration.

Looking purely at staff costs in the Philippines, for example, the wage differential has closed in recent years, but average salaries for developers still come in at 11-12k, suggests Martyn Hart, chairman of the National Outsourcing Association.

“Increasingly, financial services firms aren’t just looking at the cost of labour when making an outsourcing decision,” he says. “Very often, there’s a need for cultural affinity, even when developing software. Offshoring often leads to many coding mistakes, which inevitably leads to costly re-developments, if not a complete reissue, particularly with bespoke trading systems.”

Salaries in places like Edinburgh, Dublin or Belfast may never reach the highs technologists can command in London, but they can still be comparatively good. Project managers in the Irish capital can expect a maximum of €70-80k, suggest recruiters, while senior developers in Belfast can earn 60-70k.

Still, often the comparatively high cost of senior employees is mitigated by the fact that high proportion of new recruits are graduates, normally starting on around 18-25k. Avaloq is recruiting 75 graduates immediately, before embarking experienced hires.

“Companies setting up nearshore operations look for a young population, language skills and a good proportion of graduates,” says Hart.

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