What has happened to the financial back office jobs in London's banking sector?

In the world of finance, back-office jobs have long been considered the backbone of the industry. These roles, which include functions such as core finance, risk management, compliance, and operations, are critical to ensuring the smooth running of financial institutions. However, in recent years we have seen a large trend of these jobs leaving London, the traditional hub of the financial industry.

Why banking back office jobs are leaving London?

There are several reasons for this trend. One of the primary drivers is the high #costofliving and doing business in the city. #Rent, #wages, and other expenses in London are significantly higher than in other parts of the UK and Europe. This has led many banks to look for ways to cut costs and #increaseefficiency. Moving back office jobs to other locations where the cost of living is lower is one way to achieve this.

Another reason is the changing regulatory environment.

Regulators have been placing more pressure on banks to reduce risk and improve their transparency. This has led to increased demand for #compliance and #riskmanagement roles, which are often located in lower-cost locations. In addition, some banks are moving operations to locations where regulations are more favorable.

Finally, the growth of financial centers outside of the UK is also contributing to the shift of back-office jobs from London. Emerging markets, such as Asia, have seen rapid economic growth in recent years. As a result, financial centers in these regions are becoming increasingly important. Banks are looking to take advantage of these opportunities by establishing a presence in these locations and moving some back office jobs there.

So, where are these banking back office jobs going?

There is no one-size-fits-all answer to this question, as different banks are moving jobs to different locations depending on their specific needs, London with its almost 450-500k candidates pool is larger than Dublin, Paris, and Frankfurt combined!?Nevertheless, there are still more than 2.3m jobs in the sector - 1.1m in financial services1 and just over 1.2m in related professional services 2/3 of these jobs are outside of London driving one of the largest surplus in financial services exchange.

The UK is still Europe’s largest and the world’s 2nd largest hub for asset management and had ￡11tn assets under management (AuM) in 2020.

However, there are some repeatably popular destinations for back-office jobs.

Within the UK, cities such as Edinburgh, Birmingham, and Glasgow are becoming popular due to their lower living costs, skilled workforce, and good transport links.?Outside of the UK, popular destinations include Dublin, Frankfurt, and Paris.

These cities offer a range of advantages, including a favorable regulatory environment, access to talent, and proximity to key markets. In addition, some banks are moving back office jobs to emerging markets, such as India and the Philippines, where labor costs are lower and the workforce is highly skilled as just publicly aware (lots happen behind scenes) example:

?- HSBC announced that it would be moving more than 1k jobs from London to Paris. Bank's Delivery Centres in Poland (+6k people) and India have seen significant growth in the last 2-3 years.

- Goldman Sachs is another bank that has been moving back-office jobs out of London. The bank announced that it would be moving some jobs to its offices in Warsaw and Bengaluru, India. The bank cited taking advantage of lower labor costs as the reason for the move.

- JP Morgan Chase has been moving back-office jobs out of London for several years. In 2019, opened a new office in Paris and moved several hundred employees there. The bank has also been expanding its operations in Poland, where it currently employs over +4k people and still rapidly growing.

- Barclays is another bank that has been moving back office jobs from London to other parts of the UK (Glasgow, Manchester) and Dublin.

- Morgan Stanley is another bank that has been moving some back office jobs out of London. The bank moved some jobs from London to Frankfurt, as part of its Brexit contingency plans, but most of its previously London finance teams are now in Glasgow. Morgan Stanley has been also investing in its technology infrastructure, leading AI introduction (ChatGPT) and moving some back office functions to centers such as Mumbai and Bengaluru in India, where there is a large pool of skilled tech talent.

- Bank of America (BofA) is also shifting numbers of its core financial roles to opened back in 2010 Chester office. A number of senior employees have been transferred ahead of Brexit to the bank's Paris office. BofA also recently merged its London-based subsidiary with its Dublin-based Irish entity, which will become its main EU base making more than +400 FTEs transfer there. Dublin plays a more and more significant role in the bank's global and European operations at the expense of London.

- Citi bank - just recently announced that it will expand its operations to almost triple in Dublin where previously +2,5k people were employed in the bank's European HQ. The bank's internal sources also claim that a decision has been made to offshore most of its middle and back office functions to the Poland side in Warsaw.

Is it only the back-office jobs leaving London?

It's also worth noting that some banks have been moving other functions, such as middle office and front desk roles, to other locations as well.

Middle office functions typically include risk management, compliance, and other support functions that sit between the front office (trading) and back office (settlements and accounting) of a bank.

Front desk roles refer to sales and trading roles where employees interact directly with clients. Those are definitely the most secure and future-proof roles to stay in London!

One example of a bank moving middle office jobs out of London is JP Morgan. Not long ago the bank announced that it would be moving around 200 jobs from London to Paris, as part of its Brexit contingency plans. The bank also plans to move some of its staff to other locations such as Frankfurt and Luxembourg.

Other banks, such as Deutsche Bank and Barclays, have also been moving some of their middle office and front desk roles to lower-cost locations such as India and Poland. In addition, some banks have been investing in technology to automate some of these functions, which can reduce the need for human staff in certain roles.

While moving these roles out of London can help banks save on costs, it can also present challenges.

For example, moving middle office roles can lead to a loss of institutional knowledge and expertise, as well as potentially increasing regulatory risks if staff in new locations are not as familiar with local regulations. Additionally, moving front desk roles can lead to challenges in maintaining relationships with clients, as clients may prefer to work with staff based in their own time zone or region.

So, what does this trend mean for the future of the finance industry? On the one hand, it could lead to increased efficiency and cost savings for banks. By moving some back office jobs to lower-cost locations, banks can reduce their operating expenses and potentially pass some of those savings on to customers. In addition, by establishing a presence in emerging markets, banks can tap into new sources of revenue and take advantage of the growth opportunities offered by these regions.

However, the trend could also have negative consequences. For one, it could lead to job losses in London and other parts of the UK. This could have a ripple effect on the broader economy, as the finance industry is a significant contributor to UK GDP. In addition, moving some back office jobs to lower-cost locations could lead to a loss of expertise and institutional knowledge, as some employees may choose not to relocate or may not be able to do so.

Overall, the trend of banks moving back office jobs from London is likely to continue in the coming years. While the specific reasons for the shift may vary depending on the bank and the industry, the underlying drivers of #costsavings, #regulatory pressures, and the growth of #emergingmarkets are likely to remain important.

However, as with any major shift in the finance industry, there are both risks and opportunities associated with this trend, and it will be important for banks to carefully consider the implications of their decisions for their employees, customers, and the broader economy. For example, London's market is one of the most difficult in Europe to re-qualified or changed, redirect once taken a career path.

Excess of 0.5m banking and financial services candidate pool alongside with industry biases, like #investmentbanking always favorite people from its inner circle, no matter the quality and extent of transferable skills causing a huge "squeeze in the middle" among other mid-senior professionals from other parts of the banking industry. A similar situation happens with FitTech willing to recruit one-shop candidates far less narrow than typical bankers, due to the size its finance departments.

Those whose functions have been significantly trimmed and departments at large numbers offshore are struggling to find their way into other banking sectors due to being typically out of the scope of their target candidates' profiles.

This situation is far less an issue in smaller less congested hubs locations like Dublin, Frankfurt, or Warsaw, as well once you are inside any of the "bulge banks" as employees move internal departments more freely, without external biases and irritating hiring managers' roadblocks. Offshoring also means training new staff, starting over and over again, and the typical lack of middle office operational or rarely commercial front office pure background isn't such an issue when significant savings can be made.

Overall, the trend of banks moving even previously too sensitive, too strategic, and Group's decision-making jobs from London is likely to continue in the coming years. The only absolute certainty is that traders and the front desk, based on their revenue results will hold back very firmly.

Sources: HM Treasury: State of the sector:?annual review of UK financial services 2022

EY Financial Services Brexit Tracker

Various banks' official press releases.

Local receiving those headcounts media outlets.