AFTER another tough week in which the Treasury was accused of further U-turns on key tax issues, Alistair Darling was all smiles as he walked through the gates of Firrhill High School in Edinburgh on Friday, where he met children who have been tracking a portfolio of shares on the stock market.
The visit, to show off one of several schemes in Scotland to engage children in the financial services industry at an early age, allowed the Chancellor a few lighter moments after a morning of tough meetings with Scottish financiers and economists al
l pressing him on how Scottish financial institutions can improve their competitiveness in the current climate.
But as the Chancellor's visit on Friday marked the climax of the first Global Financial Services Week, questions were being asked about the event itself and deeper concerns about the extent of Scotland's role on the global stage.
Five days of events in Edinburgh were organised by the Scottish Government and Scottish Financial Enterprise (SFE), the sector's trade body, to "cement Scotland's position as a leading centre of the international financial services industry".
The idea was hatched by Alex Salmond and SFE chairman John Campbell during a golf tournament last year as a way of recognising the contribution the sector makes to the Scottish economy and to explore how it can grow that contribution.
According to the latest estimates, financial services are worth £7bn to the Scottish economy and account for one in 10 jobs. And as Salmond pointed out in a keynote speech at the Edinburgh International Conference Centre (EICC) on Thursday, the Government believes there is plenty of room to build on the amount that the financial institutions put into the economy. He is keen for Scotland to evolve into a major international centre for financial services, and revealed he had big ambitions for Global Financial Services Week as a way of showcasing Scotland's financial talent to a "global audience".
"It's the first time the potential of Scottish financial services has been shown in this way to a global audience. It is a step change in the ambitions of the Scottish financial sector to become a 'lion economy'," he said.
But as the Government's accountants start to sift through receipts and calculate the cost of Global Financial Services Week, questions will be asked as to whether the event was worth it. And, more importantly, whether it is in the industry's interests to hold another Global Financial Services Week.
According to some industry insiders, one criticism that is likely to be levelled at the Government and the SFE during the next few weeks is the lack of attendance from outside Scotland. Although the Chancellor travelled up from London, and there were speakers from foreign banks such as Morgan Stanley and BNP Paribas, it was noted that the vast majority of the audience was Scottish. The delegate list for the main conference at the EICC on Thursday, for example, was dominated by Scottish banks, law firms and Government economic agencies.
One participant, who asked not to be named, said he had the impression that Scotland was talking to itself, not the global audience that Salmond was aiming for. "It's a bit parochial," he said. Another remarked: "The Scottish financial services industry is not really on the radar in London and elsewhere."
When asked if they were aware that it was Global Financial Services Week in Edinburgh, several prominent investment bankers in London said they hadn't heard of the initiative. A vice-president at one leading bank in the City, who asked to remain anonymous, said he and his trading team had "no idea" of the events in Scotland. Although they did regular work with RBS's and HBOS's trading desks in London, they paid little attention to Scotland as a financial centre in its own right. "Scotland, as an industry itself, hasn't really got a presence. There are no clients in Scotland that we speak to. If that's what they are trying to do (build up a global financial services centre] they could do better on that score."
Other participants expressed concerns that the tone of the event was too complacent. While conference speakers talked up Scotland's successes so far and spoke in raptures about the country's strong education system and skilled workforce, John Gill, managing director of Standard Life for UK life and pensions, said there was a risk that organisers were becoming overconfident about Scotland's ability to build a strong, internationally competitive financial sector.
He pointed out that countries such as China and India are churning out qualified accountants and numerate graduates at an astonishing rate, but "that isn't what's going on in Scotland at the moment". Contrary to claims by Salmond, SFE executive Owen Kelly and others last week that Scotland has an excellent source of skilled graduates with which to attract global financial institutions, he said Standard Life has recently experienced problems recruiting staff north of the border. In one recent case, he was astonished to find that many of the Scottish graduates interviewed by Standard Life failed basic numeracy tests at interview.
Mark Cooke, of the software company Oracle, warned that the future of the industry was not assured. He agreed that there was an impression of complacency among some speakers, and Scotland could not afford to rest on its laurels with strong competition from emerging economies such as Brazil, Russia, India and China. "Is financial services going to become the shipbuilding industry of the 21st century and a fleeting success?" he asked.
According to Lynn Lau, head of Asia Pacific Development at Standard Life, Scotland's workforce is currently too homogeneous to compete with other financial centres. Unlike cities such as London and New York, she said Scotland doesn't yet attract the wide range of workers that global businesses look for. "Compared to London, we are a much more homogenous workforce. London is much more diverse and international," she said.
The ambitions for the week were not helped by a war of words between Salmond and Darling. Darling criticised the SNP's plans for a local income tax while Salmond bemoaned the fact that 86% of the Scottish tax system is controlled from Westminster. Salmond said: "We don't control the tax system, so we have to develop competitive advantage elsewhere. If we could, we would follow the example of what Ireland has done with tax, with just a few tweaks."
While the politicians tore into each other, the sector's key players were talking up its plus points. John Campbell, who is an investment manager for US firm State Street, told an audience at the EICC that Scotland has a lot to be proud of in financial services, not least in banking. RBS had put Scotland on the map by securing a position as the fifth largest bank in the world. Halifax Bank of Scotland is now the UK's biggest mortgage lender and the fourth largest banking group in the UK. Even smaller operations such as Martin Currie, the specialist boutique investment firm, have helped to spread Scotland's name in the global financial services industry by making considerable inroads into foreign markets, in particular in Asia-Pacific.
SFE's Kelly insisted that it was important to hold events such as Global Financial Services Week to raise the Scottish industry's profile, and to increase its chances of attracting more business worldwide. He admitted that the event did not generate as much international interest as, for example, the global private equity conference held in Munich earlier this year, but said it was important to bring the Chancellor and business leaders such as Morgan Stanley's chief administrative officer David Nicol up to Scotland.
He also argued that although the majority of participants were from north of the border, many of them had a global remit to their jobs, and therefore the messages the organisers sent out about the country's importance as a financial centre would reach far and wide. "The people working in Scotland are working globally," he said.
SFE will hold discussions with the Government and other stakeholders in the coming months about whether an event on this scale is likely to be held in Scotland again, but Kelly insisted it would be in the industry's interests for it to be held once every two years or so.
"Everything was a sellout. I would say it has been very successful," he said.
The full article contains 1396 words and appears in Scotland On Sunday newspaper.
