Growth Sector Briefing Financial and Business Services Office of the Chief Economic Adviser, Scottish Government May 2015 Growth Sector Definition Scotland s Financial and Business Services industry was identified in the Government Economic Strategy 1 as one of the growth sectors in which Scotland can build on existing comparative advantage and increase productivity and growth. Scotland is internationally recognised as the most important UK financial centre outside London and the South East, with a breadth of financial services including global custody, asset servicing, banking, investment management, corporate finance, general / life assurance and pensions. Business services is also a crucial sector for Scotland, having grown in recent years to comprise a large and diverse range of professional services. The Financial and Business Services growth sector is defined by the Standard Industrialisation Classification (SIC) 2007 codes: 64.1 - Monetary intermediation 64.3 - Trusts, funds and similar financial entities 64.9 - Other financial service activities, except insurance and pension funding 65 - Insurance, reinsurance and pension funding, except compulsory social security 66 - Activities auxiliary to financial services and insurance activities 69.1 - Legal activities 69.2 - Accounting, bookkeeping and auditing activities; tax consultancy 70.2 - Management consultancy activities 71.129 - Other engineering activities (not including engineering design for industrial process and production or engineering related scientific and technical consulting activities) 73.2 - Market research and public opinion polling 74.3 - Translation and interpretation activities 78.109 - Activities of placement agencies (other than motion picture, television and other theatrical casting) n.e.c. 78.3 - Other human resources provision 82.1 - Office administrative and support activities 82.2 - Activities of call centres 82.3 - Organisation of conventions and trade shows 82.91 - Activities of collection agencies and credit bureaus 82.99 - Other business support service activities n.e.c. Key Statistics Output static in latest quarter, but increase of 2.6% over year Recent trends in GDP (Q4 2014) - updated May 2015, next update July 2015 The latest GDP data 2 show that output in the Financial and Business Services growth sector was static in the most recent quarter, but in year on year terms output increased by 2.6 per cent. The sector s performance over the last quarter is in contrast to the increase in output measured across the economy as a whole (shown by the total GVA line in the accompanying graph), where output increased by 0.6 per cent over the quarter and 2.8 per cent year on year. Although the sector saw a decrease in output of 10.7 per cent between the third quarter of 2007 and the second quarter of 2011, it has since recovered with output increasing by 9.9 per cent between the second quarter of 2011 and the fourth quarter of 2014. Output in the sector is still 1.9 per cent lower than the peak in Q3 of 2007 however. 1 http://www.gov.scot/topics/economy/economicstrategy 2 The index represents the volume of GVA created compared to the 'base' year (currently 2012). Figures are deflated to remove the effect of price changes over time to produce an estimate of real terms (or constant price) growth. The figures are seasonally adjusted to remove the effects of regular, calendar based cycles in certain industries.
120 2012=100 Scottish Quarterly GDP index, 2014 Q4 100 80 60 40 2007 2008 2009 2010 2011 2012 2013 2014 Total Gross Value Added Financial and Business Services Decrease in between 2012 and 2013 Just over 19% of relates to banks and building societies Employment (2013) updated October 2014, next update October 2015 Employment in the Financial and Business Services growth sector stood at 215,200 in 2013, representing a 0.1 per cent decrease from 2012 (down 400 jobs). In Scotland, the sector accounts for 8.7 per cent of, whilst across Great Britain as a whole, the Scottish sector accounts for 7.8 per cent of in Financial and Business Services. Within the Financial and Business Services Growth Sector, 19.1 per cent (41,200) of jobs are in Monetary Intermediation, which pertains to the activities of banks and building societies. Other Engineering activities (which encompasses architectural engineering services, drafting services, building inspection services and surveying and mapping services and similar) represents another 13.2 per cent of jobs. Activities auxiliary to financial services and insurance activities, Management consultancy and Legal activites represent another 12.1 per cent (26,100), 11.2 per cent (24,200) and 11.0 per cent (23,700) of jobs in this growth sector respectively. Employment in Financial and Business Services 2012-2013 2013 2012 19.1% 19.6% 13.2% 11.1% 12.1% 14.3% 11.2% 11.2% 11.0% 9.5% 7.8% 9.7% 6.9% 7.0% 5.5% 6.0% 3.9% 2.6% 4.3% 3.9% 2.1% 2.6% 215,200 215,600 0 50,000 100,000 150,000 200,000 2012 2013 SIC 64.1: Monetary intermediation 42,300 41,200 SIC 71.129: Other engineering activities (not including engineering design for industrial process and production or engineering related scientific and 23,900 28,500 technical consulting activities) SIC 66: Activities auxiliary to financial services and insurance activities 30,800 26,100 SIC 70.2: Management consultancy activities 24,100 24,200 SIC 69.1: Legal activities 20,400 23,700 SIC 69.2: Accounting, bookkeeping and auditing activities; tax consultancy 21,000 16,800 SIC 82.2: Activities of call centres 15,000 14,800 SIC 65: Insurance, reinsurance and pension funding, except compulsory social security 13,000 11,800 SIC 78.109: Activities of placement agencies (other than motion picture, television and other theatrical casting) n.e.c. 5,600 8,400 SIC 82.99: Other business support service activities n.e.c. 9,200 8,300 SIC 64.9: Other financial service activities, except insurance and pension funding 4,500 5,500 SIC 82.1: Office administrative and support activities 1,800 1,800 SIC 82.91: Activities of collection agencies and credit bureaus 1,600 1,400 SIC 64.3: Trusts, funds and similar financial entities 600 800 SIC 73.2: Market research and public opinion polling 800 700 SIC 78.3: Other human resources provision 300 500 SIC 82.3: Organisation of conventions and trade shows 600 500 SIC 74.3: Translation and interpretation activities 100 200
Employment across Scotland (2013) updated October 2014, next update October 2015 More than 50% of in Edinburgh and Glasgow Employment in the Financial and Business Services growth sector is highly concentrated, with 50.3 per cent of concentrated in the City of Edinburgh (27.0 per cent) and Glasgow City (23.4 per cent) combined. To better understand the importance of the Financial and Business Services growth sector to local economies, it is useful to consider location quotients 3. The top three Local Authorities in terms of location quotients are: City of Edinburgh 2.2, Glasgow City 1.5 and Inverclyde 1.4. In these local authority areas the Financial and Business Services sector is over-represented, where in Scotland as a whole 8.7 per cent of is in this sector, in the City of Edinburgh it is 18.4 per cent, Glasgow City 12.8 per cent, and in Inverclyde 12.2 per cent. 16 % of Scotland s exports Exports decreased 3.4% in real terms 2012-13 79.7% to Rest of UK Exports - Global Connections Survey (2013) 4 updated February 2015, next update January 2016 Total exports from the Financial and Business Services growth sector stood at 11.9 billion in 2013, accounting for 16.0 per cent of Scotland s total exports. Exports from the sector were 3.4 per cent down in real terms 5 from their 2012 level. Exports to the Rest of the UK (RUK) stood at 9.5 billion in 2013 and accounted for 79.7 per cent of total Financial and Business Services exports. Exports to the Rest of the World (RoW) stood at 2.4 billion and accounted for 20.3 per cent of total Financial and Business Services exports. 3 The location quotients used here compare the percentage of jobs in a local authority that are in Financial and Business Services against the percentage of all jobs in Scotland that are in Financial and Business Services. Therefore, in a local authority with a location quotient of 1.0 the percentage of jobs in Financial and Business Services is the same there as in Scotland as a whole. In a local authority with a location quotient greater than 1.0 the percentage of jobs in Financial and Business Services is higher there than in Scotland as a whole, and in a local authority with a location quotient lower than 1.0 the percentage of jobs in Financial and Business Services is lower there than in Scotland as a whole. 4 The figures for growth sectors are derived by aggregating estimates based at a low Standard Industrial Classification (SIC) level. The Global Connections Survey is not designed to collect data at this level of accuracy, therefore these results should be treated as indicative. 5 2013 prices based on Treasury GDP deflators (December 2014).
Nearly 98% of small, but almost 58% of in large Enterprises (2014) 6 updated January 2015, next update November 2015 In March 2014, there were 25,090 registered operating in the Financial and Business Services growth sector, representing 15.1 per cent of all registered businesses operating in Scotland. The Scottish Financial and Business Services growth sector is characterised by small businesses. In 2014, 97.6 per cent of Scottish Financial and Business Services growth sector registered were small (0-49 employees), although these accounted for 33.1 per cent of in the sector. In contrast, large (250+ employees) which accounted for 1.2 per cent of registered, accounted for 57.6 per cent of in the sector. Financial and Business Services Share of Enterprises and Employment 2014 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Enterprises Employment Large (250+ employees) 1.2% 57.6% Medium (50-249 employees) 1.3% 9.3% Small (0-49 employees) 97.6% 33.1% Most UK owned registered in Scotland Median earnings higher than average at 566 per week The vast majority of in the sector are UK owned with their registered office address in Scotland (97.5 per cent), accounting for 68.2 per cent of in 2014. Furthermore, 1.2 per cent of businesses are abroad owned, accounting for 16.4 per cent of in 2014. Earnings (2014) updated January 2015, next update November 2015 Median weekly full time earnings across the Scottish Financial and Business Services growth sector stood at 566 in 2014 up 3.5 per cent on 2013 (nominal terms). Earnings in the Financial and Business Services growth sector compare favourably to the Scottish average, which stood at 519 in 2014. Sector R&D spend is 10.7% of Scotland total Research and Development (2013) updated January 2015, next update December 2015 Business Enterprise Research and Development (BERD) spending in the Financial and Business Services growth sector was 85 million in 2013, an increase of 187 per cent since 2012. Please note that this is driven by large increases in spending in a small number of companies in this sector. Spending on Research and Development in this sector represents 10.7 per cent of the total BERD in Scotland. 6 Employment statistics referred to here are not directly comparable with Business Register and Employment Survey (BRES) data.
Sources of Information GDP Scottish Government Quarterly GDP Index. Employment Business Register and Employment Survey. Exports Global Connections Survey. Enterprises Inter Departmental Business Register. Earnings Annual Survey of Hours & Earnings. Research and Development Business Enterprise Research and Development survey. All data are available from the Growth Sector Statistics Database, at: http://www.scotland.gov.uk/topics/statistics/browse/business/publications/growthsectors For more information about the methodology behind the Growth Sector Statistics Database, please see the Methodology Note, at http://www.scotland.gov.uk/topics/statistics/browse/business/publications/growthsectors/methodologynote