Scotland’s financial services sector could unlock additional 21% GVA by 2028

Scotland’s financial services industry has the potential to increase the sector’s GVA contribution by up to 21% by 2028, according to new research by EY. That is if key competitive advantages are harnessed and barriers to growth addressed. 

The first Accelerating Growth in Scotland’s Financial Services Sector, which is based on detailed economic analysis, in-depth interviews, and a survey of Scotland’s financial services senior leaders, outlines measures that could raise compound yearly GVA growth to 4% (up from 2.9% today).  

Delivering such growth could raise employment across Scottish financial services, not including related professional services, by as much as 18% by 2028, at a compound annual growth of 3.4%. This would add an additional 16,000 new jobs to Scotland’s financial services industry and bring total employment to 105,000 by 2028 (up from 89,000 today).  

Sue Dawe, EY Scotland Managing Partner for Financial Services, said:  “This report is not just a reflection of current conditions but a call to action for all involved to collaborate on the continued success and growth of the sector. Scotland's financial services sector must continue to reinforce existing strengths and address potential barriers to growth. 

“Central to this fantastic growth narrative is the recognition that technology infrastructure and innovation, a robust regulatory and legal framework, and demographics and labour supply will play a vital role in shaping Scotland's financial services future.  

“The sector has already done a lot of the thinking about where we need to go, and it is reinforced by this research; we now have to turn that strategy into action, driving sustainable growth and prosperity for years to come.” 

Sandy Begbie, Scottish Financial Enterprise, Chief Executive, said: “Scotland has long been a key part of the UK’s financial and professional services sector and today remains one of the most competitive financial centres in Europe.

"Our sector growth strategy set out our ambition to grow the sector and our contribution to the economy, and with Scotland’s rich heritage, exceptional human capital and strong capability in data and AI, we are well placed to do so.

"While there are still some ongoing challenges facing our industry, such as high personal tax, a lack of government support in R&D and challenges surrounding government funding for further education which risks pushing our brightest and best out of Scottish universities, it is pleasing to see our sector continuing to strengthen."

Talent in Scotland is driving financial services growth

A third of Scotland’s financial services leaders (32%) highlighted the gender balance and cultural diversity and inclusivity of the workforce as a significant advantage over international peers, with a further third (32%) highlighting the strong availability of skills in key areas, such as emerging technologies and ESG integration, as a competitive advantage. 

Scotland’s education pipeline and talent retention were also highlighted as strengths of the financial sector, with a third (32%) of leaders citing the talent pipeline from Scotland’s schools, colleges and universities, more than a fifth (22%) citing specialised training programmes, and more than two in five (41%) citing the retention of graduates in the domestic workforce as competitive advantages. However, more than a third (36%) of leaders view challenges with retaining top-tier talent as potential barriers to Scotland’s financial services growth.

Close proximity to continental Europe supports Scottish growth 

Scotland being located close to major financial centres including London, Paris and Dublin is highlighted by more than two in five (43%) leaders as a competitive advantage. This reinforces the role geographic positioning continues to play in attracting firms looking for cost-efficient proximity to broader European markets. However, despite Scotland’s proximity to continental Europe, more than a third (36%) of leaders view lack of access to the European market as a barrier for growth, highlighting the loss of the passporting regime for financial services companies post-Brexit as a particular disadvantage for the Scottish industry. 

Lower overheads help Scotland to compete as a financial hub

More than a third (36%) of leaders surveyed identified Scotland’s comparatively lower cost of living and doing business as a key strength for the sector, with a further two in five (38%) viewing the outlook for the UK’s economic growth as a key advantage. 

Personal income tax and lack of support for scaling businesses seen as the main barriers to the growth 

When it comes to barriers to growth, Scotland’s personal tax regime is seen by 46% of leaders as being the leading disadvantage to the Scottish financial services industry relative to international peers, with a further 36% citing difficulty in attracting top talent due to the less-attractive tax framework and challenges with visa availability and processes. 

More than a third of Scotland’s financial services leaders (35%) also raised concerns about lower levels of government support and investment research and development (R&D), with more than a quarter (28%) seeing a lack of access to capital for early stage FinTech startups as a competitive disadvantage for Scotland. 

Scottish financial services leaders recommendations to accelerate sector growth 

The report makes recommendations to capitalise on the strengths of Scotland’s financial services sector and support the accelerated growth, including: 

• Policy: accelerate some fundamental policy change to drive greater growth potential in the FS sector in Scotland, key areas of focus should include visa regime, personal tax and infrastructure  
• Talent: make it easy for firms to access and attract talent, armed with the right skills and experience to support the sectors growth ambition in Scotland, including skilling and reskilling, recruitment pathways and education-industry partnerships  
• International differentiation: better promote Scotland’s global appeal to drive greater inward investment through a sector-wide FDI narrative and investment case, expand support for early-stage start-up firms and trade delegations focused on FS and Fintech.

Notes to editors:

• *Sector contribution to GDP is measured in terms of gross value added (GVA), defined as the value generated by any unit engaged in the production of goods and services.
• In order to reflect the demographic of leaders surveyed, the growth forecast for Scotland’s financial services sector has been calculated using Office for National Statistics (ONS) data on Scotland’s financial and insurance activities, representing a workforce of approximately 89,000 people. This is a more conservative estimate of employment compared with the 136,000 typically used by SFE and others, encompassing parts of the professional services sector that focus on financial services.   
• Accelerating growth in Scottish financial services: The EY Financial Services Accelerators Study analyses and models the factors in common of the world’s fastest-growing financial services centres, focused on five key pillars – or ‘accelerators’: regulatory and legal frameworks; macroeconomic fundamentals and policy; cross-border business and trade environment; demographics and labour supply; and technological infrastructure and innovation. 

About EY’s Financial Services Accelerators Scotland Study:

EY’s Financial Services Accelerators Study in Scotland sought to explore and analyse the levers that can catalyse Scotland’s growth and attractiveness on the global stage - a central focus for policymakers and market stakeholders alike.

The study is based on the premise that there are valuable lessons to be drawn from the world’s fastest-growing financial services centres. Exploring and understanding the factors – or ‘accelerators’ – of these markets’ success provides crucial inputs to building more effective catalysts for growth across the sector in Scotland.

To achieve this aim, the study sought to answer four key questions:  

1. What are the fastest-growing financial services markets globally?   
2. What are the common factors conducive to fast-growing financial services hubs?   
3. To what extent do these factors exist across the Scottish market - and what are the strategic advantages enabling, and structural impediments potentially limiting, Scotland becoming a leading global financial services “hub” going forward?   
4. What steps could stakeholders and policymakers across the Scottish financial services sector take to reinforce Scotland’s existing strengths and accelerate future growth across the sector?

Research approach   

In-depth research was undertaken to inform the findings and recommendations of the study including:  

• Granular analysis of the common factors across the world’s fastest-growing financial services hubs globally.      
• Detailed qualitative analysis of Scotland’s financial services sector’s historical context, past and forecasted economic performance.    
• Insights gathered from 70 financial services leaders across the Scottish market via purpose-built survey.    
• Collation of executive perspectives by way of in-depth interviews with Scottish C-suite and senior stakeholders from across the sector