Next Wednesday, the annual Basque financial event will be the focus. Scotland is a mirror in which Euskadi looks at itself in the launch of its financial cluster.
What are the major challenges facing SFE and the Scottish financial hub?
-Our sector has faced significant change in recent years, having responded to the lessons and impact of the 2008 financial crisis, weathered Brexit, the pandemic and the recent volatile economic environment. Against this backdrop, we face two major macroeconomic challenges. Firstly, an increasingly unpredictable global environment driven by geopolitical risks, high inflation and interest rates; combined with the associated risk of recession and the resulting impact on businesses and people. Secondly, the climate challenge, which will require mobilisation and investment on a global scale to rise to the challenge. In Scotland, our sector is facing increased competition from new and emerging financial centres and a number of factors, including Brexit, have altered the competitive landscape in Europe through a realignment of people and capital from London. However, the main challenge is the transformative impact of technology on our sector, in particular the explosive growth of data, artificial intelligence and other emerging technologies.
How do you adapt to these challenges?
-Rather than simply responding to these challenges, our sector has sought to lead the way, drawing on our strengths in human capital and innovation (particularly through Scotland’s world-class universities), our core expertise in established sectors, and our vibrant ecosystem that includes industry, government, regulators and academia. We also identified the need to provide a clear and compelling articulation of our sector’s strengths, Scotland’s attractiveness as an investment destination, and our ambition to drive growth for our sector and the economy. Key to this was working in partnership with diverse organisations to provide a single voice to champion our industry, nationally and internationally.
What volume of investment does the Scottish financial cluster manage?
-Scotland is the UK’s largest financial centre outside London, worth almost £15 billion to the Scottish and UK economy. Scottish financial services firms have around £500 billion in assets under management.
What are the main areas of activity in which Scottish financial firms operate?
-One of our strengths is the depth, breadth and maturity of our financial services landscape. All areas of FS are represented at scale, including banking, asset management, insurance and long-term savings, private equity, wealth management and venture capital. This is supported by a high-quality technical, legal and professional support services sector and a thriving technology ecosystem. Our sector acts as the engine room of the Scottish economy, supporting people and businesses across all sectors to invest, thrive and plan for the future. But we are clear that growing our economy must be inclusive and reach all sectors of our society. Our partnership with Financial Inclusion for Scotland aims to increase access to banking for all, improve money advice and financial education, boost access to affordable credit and use up-to-date information to help vulnerable customers. This year we will be particularly focused on our work across the industry, alongside fintech companies and the regulator, to ensure that citizens across Scotland are connected to the financial system by enabling access to the banking system for those who are currently unbanked.
What impact has the financial cluster had on the Scottish economy?
-The financial services industry in Scotland dates back more than 300 years, to the founding of the Bank of Scotland in 1695. Since then, our members have helped people, businesses and the wider economy overcome uncertainty and thrive through innovation and professionalism. Today, our sector accounts for 10% of the Scottish economy and employs around 150,000 people directly and tens of thousands more in the supply chain. But our sector also plays a role in every other sector of the economy; unlocking capital, funding infrastructure and driving growth and jobs.
What can the history of the Scottish financial company teach the newborn BasqueFIK?
-Scottish Financial Enterprise is approaching its 40th anniversary and our mission is to enhance Scotland’s reputation as a global financial centre, foster a healthy and responsible business environment and positively influence public policy. Key to achieving this is collaboration with our members, businesses, governments (Scottish and UK) and the third sector to foster a more resilient, inclusive and sustainable financial ecosystem in Scotland. Building strong partnerships with peer organisations and working closely with FinTech Scotland, the Global Ethical Finance Initiative (GEFI), TheCityUK and the City of London Corporation, along with engagement with the education sector, are critical to our success. Defining the organisation’s core principles is also key to ensuring that activity remains focused and effective. For us, these three principles are: to be solely member-led and funded (no public funding), to have an industry-wide reach and to be Scotland-focused.
To your knowledge, are there any similarities between the Basque and Scottish economies? What is the level of financial autonomy in Scotland?
-While Scotland’s century-old financial services sector has a distinctive identity, a core strength is its relationship with London, the world’s second largest financial centre. We view the relationship with London as complementary rather than competitive and seek to leverage the strength of one of the world’s largest capital markets and home to a world-class regulatory regime. Our devolution arrangement means that while the UK Government retains regulatory responsibility for our sector, through devolution, the Scottish Government has some influence over the business environment and investment attraction. Our sector is most likely to succeed when these two governments work closely together to promote the unique strengths of our sector.
Has Edinburgh gained weight as a financial centre compared to London after leaving the EU?
-Scotland’s financial services sector has adapted to a number of changes in recent years, including Brexit. Although Edinburgh (ranked 32) and Glasgow (ranked 42) are measured separately in the internationally recognised Global Financial Centres Index, their connectivity means they are akin to a single centre of expertise and influence, second only to London in UK terms. Our sector has also benefited from global market trends, such as the adapting location strategies of global businesses, who are drawn to Scotland rather than London by a range of factors, including our strong human capital based around world-class universities, expertise across the sector and relative cost of doing business.
