Scotland's financial sector banking on the back office

Scotland's financial services sector is still "treading water" when it comes to creating high-earning front office positions, but its comparatively low cost base means that more operational roles are likely to gravitate north of the border.

The latest Ernst & Young Scottish Item quarterly report focuses on the harsh cuts coming to the public sector north of the border, with as many as 30,000 jobs expected to go over the next four years.

By comparison, the financial sector received little attention, so are we to assume that no news is good news? Not necessarily - the Item Club hasn't changed its views on the Scottish financial sector since its last report, when it suggested further swathing job cuts were unlikely but uncertainty still remained.

"Banks and fund managers are treading water at best when it comes to front office job creation," says Dougie Adams, senior economic advisor to the Ernst & Young Scottish ITEM Club.

Scotland's financial sector has suffered much larger setbacks than the UK as a whole. Output shrank by 10.3% in the 12 months to Q3 2009 (the latest figures available), compared to a reduction of around 5% at a UK level.

One areas Scotland appears to be gaining ground, however, is in the creation of back office roles. As we revealed last week, Barclays Capital is due to shift hundreds of operation roles to Glasgow this year, and it's not the only firm looking to expand.

"Scotland is doing very well out of the restructuring of Lloyds Banking Group in terms of where they're deciding to base back office functions," says Adams. "It's an area of strength for the financial sector here, and one that creates large numbers of jobs."

Still, for every positive development, there appears to be a negative one to match it. Last week, RBS revealed it was cutting 500 back office roles in its wealth management divisions, some of which will hit Scotland.

Questions are also being raised about National Australia Bank's (NAB) commitment to the UK following its withdrawal from the race to purchase more than 300 RBS branches. NAB is the parent company of Clydesdale Bank.

"Overall, financial services in Scotland is not as buoyant as other parts of the services sector," concedes Adams.