Over the next few years, the main drivers of growth in financial services will be:

• Demographics: An increasingly wealthy and ageing global population
• Technology: Productivity gains through the application of IT-enabled process and product innovation
• Regulation: Principles-based regulation introducing both flexibility and uncertainty
• Competition and structural change: Consolidation and process or product innovation
• Cost control: Outsourcing, offshoring or cessation of lower value-added tasks
• Skills: Boosting productivity by improving the skills of the workforce.

Geographically, those areas that have established strong financial services clusters will reap the rewards of specialisation and capture the largest share of growth in both output and employment.

Information technology and compliance requirements will, over the next few years, continue to be the most significant determinants of productivity. Skills are a mid-ranking factor among the drivers of productivity, although in the wholesale sectors and in investment and fund management, technical skills will be the most important contributors.

Growth will be led by asset management and auxiliary activities, and generate mostly new sales, customer service, professional and managerial jobs.

By 2010, direct employment is expected to grow by just short of 1% annually, even though real output will grow by 3.7%, which represents a 2.9% annual growth in output per employee. This will be achieved partly by upskilling the workforce, which, according to FSSC calculations, could affect more than 12,500 jobs by 2010. With around 10,100 new jobs created per year, the sector will need 53,000 to 65,000 new entrants annually in order to fill these roles and replace retiring staff.

Sources: FSSC The Skills Bill: An agenda for the industry 2007, FSSC The Skills Bill: Analysis of Skills Needs in UK Financial Services 2007, FSSC The view from Europe: Productivity and change in UK financial services 2007, Working Futures 2004-2014 and FSSC UK Financial Services: Five Years Forward 2006