Labour demand, job roles, and skills in financial services

05 October 2023

What do we mean when we talk about ‘financial services jobs’?

In a previous blog post, I wrote about combining microeconomic and macroeconomic data to gain new insights. The micro data I referred to in that post came from a proprietary dataset, but the Office for National Statistics (ONS), too, is expanding the range of data sources they use—allowing us to draw new conclusions about financial services employment and skills

Official job vacancy data is based on a survey of businesses. Across the UK, the number of job vacancies in financial services averaged 41,000 in the first half of 2023, down from an average of 53,000 in the year-earlier period. Vacancies are an indication of labour demand, and the data show that over the past five years, UK financial services employment demand declined steadily from 2018 until the onset of the Covid-19 pandemic; rebounded sharply for two years from Q2 2020; and since then, has resumed its downward trend.

Source: Office for National Statistics.

In this context, financial services refers to a specific classification of companies based on their type of economic activity (Standard Industrial Classification). ‘Financial services’ job vacancies therefore comprise all job vacancies in finance, insurance and an ‘other’ category called ‘activities auxiliary to financial services and insurance activities’. These vacancies could be for what we would tend to think of as a finance job (for example, equity research analyst), or for a non-finance specific job in a financial services company (for example, software engineer). The data therefore tell us something about demand for labour among financial services firms, but nothing—necessarily—about demand for particular roles within the industry.

However, the Financial Services Skills Commission (FSSC), an independent body representing the UK-based financial services industry on skills, has used the UK Standard Occupational Classification (a categorisation of jobs based on skills and qualifications) to analyse specific roles that are prevalent within financial services. FSSC analysis shows that of the top ten roles within the industry based on the volume of roles, six are industry-specific—that is, roles such as investment analysts that are unlikely to be found in other, non-finance industries:

Source: Financial Services Skills Commission analysis of user-requested data from the Office for National Statistics.

Our additional analysis shows, however, that there is a very long tail of jobs within the industry that are more generic—roles such project managers and software developers which appear within financial services employment, but which are not specifically industry-related. The result is that overall, roughly one-third of roles within financial services are roles specific to that industry, and two-thirds are roles that could also appear in other industries:

Source: TheCityUK analysis of user-requested data from the Office for National Statistics

Meanwhile new, experimental data gives us additional insight into roles (and therefore, implicitly, skills), as well as a more up-to-date look at labour demand. The ONS has partnered with Adzuna, an online job search engine, and has published data on online job adverts by category. Adzuna’s categorisations do not align with the Standard Industrial Classifications used in the official data, so they cannot be compared directly to the industry vacancy data.

However, the Adzuna categorisations align more closely to occupation data (for example, ‘Sales’). It is likely that what it covers in its ‘Accounting/finance’ category includes some roles specific to the financial services industry (such as finance and investment analysts) and some roles that could appear either in financial services or in other industries (such as financial managers and directors).

The experimental data show that online job adverts in the category ‘Accounting/finance’ moved in the same way as financial services vacancies: a pre-pandemic decline, a surge in demand from 2020-22, and a subsequent decline. The observation is interesting, but it may be a simple coincidence. We cannot draw firm conclusions about demand for particular roles within financial services: firstly, vacancies are not exactly the same measure as online adverts (though of course they are related); secondly, and more importantly, we know that roughly 40% of roles within financial services are, broadly speaking, Accounting/finance roles.[1] But it is impossible to know how many of the Accounting/finance jobs being advertised were within the financial services industry, and how many were in other industries.

By looking at multiple datasets and sources in parallel, we can start to gain insights into trends in labour demand in financial services generally, and trends in labour demand for specific roles that are prevalent in financial services. However, the data do not present a clear picture of the extent to which the composition of labour demand within the industry might be changing, or indeed, if it is changing at all, because we have no breakdown of demand for roles in the industry that are also in use (or in demand) outside the industry—such as financial manager, or software developer. If we were to repeat this analysis with related professional services, the picture would be even blurrier; the FSSC notes that in professional services there is a much higher prevalence of roles outside the specific sector than there is in financial services (for example, lawyers employed or sought outside the legal services sector). The FSSC believes that roles like these are important for assessing the potential pipeline of talent for the financial and related professional services industry (assuming that the labour market enables cross-sector mobility).

In addition to questions about specific roles, the question of which skills the financial and related professional services industry needs to thrive in the years ahead is pertinent. It is of interest not only to the industry itself, but also to policymakers as they consider the perennial question of UK regional inequality and opportunities to boost employment across the country—as discussed, for example, at the recent launch in Leeds of our 2023 ‘Enabling growth across the UK’ report. Combining official and experimental data gives us more (though still very imperfect) understanding of labour demand in the industry and of roles relevant to financial services, both within and outside the industry. But better data on skills, and insight into the relationship between industry roles and skills, are still needed. In addition, insight into regional variation in labour/skills demand would be welcome. In my next post, I will use a different experimental dataset to start to address this last issue.

[1] Based on TheCityUK’s assessment of the user-requested ONS data

Anjalika Bardalai photo
Anjalika Bardalai Chief Economist and Head of Research

Anjalika manages TheCityUK’s economic research programme. She leads the team that produces the organisation’s in-house economic research, presents research and analysis externally, and writes TheCityUK’s economics blog.

Prior to joining TheCityUK in 2014, Anjalika spent 12 years with the Economist Intelligence Unit (EIU) in the company’s New York and London offices, holding a number of different roles, including head of the EIU’s flagship Country Reports series. She also worked for the consultancy Eurasia Group, advising financial-markets clients on economic and political risk. She has spoken at conferences in a dozen countries across the Americas, Asia and Europe. In addition, she has appeared as a commentator on leading international broadcast media, and has been quoted in print media in the UK, US, India and elsewhere.

Anjalika has a BA from New York University and an MBA from Imperial College Business School. She sits on the Advisory Council of the International Sustainability Institute, and is an Ambassador for the financial-education charity FairLife. In addition, she is Vice Chair of the RSPCA’s London East Branch and previously served as a Trustee of the charity All Stars London and as a member of the Alumni Advisory Board at Imperial College Business School.