The return of the mystery of the missing jobs in banking and finance

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Something funny seems to be going on with jobs in the UK banking and finance industry - again. This short paper explores three concerning trends:

• Missing jobs: the number of jobs in the ‘jewel in the crown’ of the UK economy has stagnated over the past decade in absolute terms at around 1.1 million and shrunk compared with the rest of the economy. There are now roughly 100,000 fewer people working in the industry than there would be if it had kept up with the rest of the economy over the past five or 10 years.
  

• Flat-lining productivity: output per worker in banking and finance has flatlined over the past decade in real terms at around £200,000. While this is nearly three times the average for the rest of the economy, it means that total output from financial services has scarcely grown in real terms since 2010 and its share of UK GDP has shrunk to its lowest level in 20 years.
  

• ‘De-regionalisation’: over the past few decades employment in the financial services industry has become more concentrated in London and the South East, which now account for just over half of all jobs in financial services, up from 41% in 2005. The number of jobs in the industry has fallen since 2015 in every region of the UK except London, the North West, and Scotland.

This doesn’t sit very comfortably with the traditional narrative about the industry being an engine of growth for the UK economy or with the new government’s focus on creating growth in every postcode.

There is no single factor driving these trends: we think it’s a combination of poor data, the impact of Brexit and sluggish economic growth in the UK, the shift towards outsourcing and offshoring, traditional jobs being replaced by technology and fintech, and the wider tax and regulatory framework.