"That may have been the case in Edinburgh in the past, just as one could argue there are too many platforms right now and that consolidation will happen there."
Reid has spent multiple decades in financial services in Scotland and adds: "One of the issues that forced consolidation was that a lot of the business written by the mutuals was with profit funds, and when it didn’t work, the companies struggled and in some cases the regulators stepped in as they had to raise capital and that led to the takeovers.
"I would say that when the new owners came in, in a lot of cases they were a lot sharper with the numbers, and with how they ran the businesses."
He also suggests that what he regards as the “greed” of bankers in the years before the global financial crisis dented the long-term strength of the sector in Edinburgh.
A brain drain?
That may be so; there has been a reduction in the number of people working in financial services companies in Scotland over the past 20 years, and the financial crisis exacerbated the situation.
According to a Skills Development Scotland assessment report, in 2023 there were 69,600 people working in the financial services industry across Scotland.
Compare this with a 2013 report from the UK government, which put this figure at more than 85,000, with a further 100,000 indirectly.
At the time, the 113-page government report, "Scotland analysis: Financial services and banking", said: "The financial services sector remains one of the most important industries in Scotland and the rest of the UK."
It found:
- Financial services contributed £8.8bn to the Scottish economy in 2010 – more than 8 per cent of Scottish onshore economic activity.
- The sector directly employs 85,000 people in Scotland and a further 100,000 indirectly – around 7 per cent of total Scottish employment.
- As part of the UK, Scotland is a strong and attractive location for financial services business.
- These strengths have developed over the past 300 years, with a long history of successful Scottish innovation.
The figures may seem discouraging, but Polson says that while the total number of people employed in financial services may have reduced, he sees this more as a function of the changing face of the industry as a whole, rather than the fact that takeovers have happened.
He says: “In the early 2000s, technology did away with a lot of the processing type jobs in financial services. So those jobs would have disappeared anyway, regardless of who owned the companies. It is just the nature of how any industry works.
"There has also been some outsourcing of those jobs to locations outside of Edinburgh but within Scotland, as those locations are lower cost, but also technology makes it more viable to do this.”
For example, he says Prudential having a substantial presence in Stirling is as an example of this. Prudential bought Scottish Amicable in 1997.
And as to the reasons why Edinburgh developed such a strong presence in financial services, Polson says it began with the insurance industry, with Edinburgh University having a dedicated school for the training of actuaries.
