The slow grind towards pre-crisis financial services job levels in Scotland

It's a bullish statement for Alex Salmond to make - financial services jobs in Scotland will return to pre-crisis levels by the end of 2011 (or early 2012).

During a press conference on the Scottish jobs market yesterday, Salmond singled out financial services as being this year's success story. Before the crisis struck in 2008, there were 105,000 people employed in financial services roles north of the border, this declined to 91,000 in 2009 and has since crept up to 101,000, he said.

"There is a reasonable expectation that we will get back to pre-recession levels by around the end of this year, into next year," he said.

This is a positive sentiment supported by some encouraging stats. It does, however, run contrary to the conclusions of the latest Ernst & Young Scottish Item Club report, which suggests there's going to be little financial services jobs growth going into 2012.

In reality, the picture is a little mixed.

The growth areas

Strategic roles in retail banking...and call centres

The likes of Virgin Money and Tesco Bank are still recruiting for strategic roles in their Scottish HQs. This includes areas like risk management, as well as product managers to role out insurance and credit card products, among others. Similarly, the larger banks are hiring change managers, project managers and people to help boost their defences around financial crime.

The sort of volume growth that's going to push total jobs to pre-crisis levels, however, is coming from not particularly auspicious call centre roles. Tesco is still recruiting for hundreds of people, as is Virgin Money.

As Dougie Adams, senior economic adviser to the E&Y Scottish Item Club, has told us previously, it's the "plumbing" of the financial system that is providing jobs growth.

Investment operations

The bombastic hiring announcements from the likes of BlackRock (250 new jobs in Edinburgh), State Street ( 90 new roles in the Scottish capital) and BNY Mellon (60 new positions) make for some good headlines. However, recruiters suggest that job creation in the first half and general expansion has eclipsed these announcements already in 2011.

"I'd say most investment operations firms in Scotland have created at least 100 jobs from January to June, but this generally goes unnoticed," says one financial services recruiter.

The simmering sectors

Fund management

Fund management in Scotland is never likely to provide voluminous opportunities.

Even in a good year, the larger fund managers in Scotland, like Standard Life Investments and Scottish Widows Investment Partnership, tend to create around 90-100 new roles. The boutique players might have been relatively active last year, but even then it would mean a net headcount increase that barely makes it into double figures.

The employment picture for Scotland's fund management sector is by no means negative, but most of the hiring is replacement rather than expansion, says Graeme Knox, director of fund management headhunters Knox Consultancy.

"Pre-crisis, fund managers were investing in new products, enlarged marketing drives and distribution capabilities. By comparison, current job creation is minimal," he says.

Private banking

The proliferation of new wealth management players in Scotland in recent years suggests that it's an expanding sector, particularly with the ongoing hiring announcements.

In reality, a lot of the larger players have been losing people to these new boutiques and much of the recruitment has been more down to churn than significant expansion. Both Barclays Wealth and Adam & Co have unveiled a lot of new faces both this year and last, but they also lost a lot of people during the same period.

Ongoing shrinkage

Insurance

Aegon, which is headquartered in Edinburgh, cut jobs has been cutting jobs since the middle of last year, with the latest tranche of layoffs taking place in May, as it looks to reduced UK operating expenses by 25% by the end of this year.

Standard Life also announced plans to pare back its Scottish workforce in 2010. So far, there's been little evidence of much job creation to offset this retraction, aside from roles related to Solvency II (largely actuarial, or contract) and some operation positions.

Retail banking

Tesco and Virgin might be hiring, but large redundancy announcements are still emerging from Lloyds Banking Group, where 2,500 jobs have been lost in Scotland since the HBOS merger in 2008.

RBS has been comparatively quiet in terms of job losses so far this year, but there are concerns around how the proposed ring-fencing of retail banking could affect profitability within large UK banks. Add in the fact that change managers are still being drafted in to shake up various functions and reduce costs, and there are still some reasons for concern.