by Keith Ualker
There is a commonly held belief that Scottish'people are frugal with their wealth. However, the Scots disagree with this view... they prefer to be known as people who are "good with
This being the case, it will come as no surprise to learn that the Scottish financial sector has grown at a phenomenal rate over the last 10 years to become the fourth largest in Europe.
On a recent visit to the Board of Scottish Financial
Enterprise in Edinburgh - a 200-member organisation set up in
1986 to promote and represent the sector - Treasury Minister
Angela Knight paid tribute to the achievements of the banks,
insurers, fund managers and financial institutions in Scotland,
praising the key role they play in the economy of the UK.
Scotland has undergone tremendous changes over the last 30
years or so. Its traditional industrial base of steel-making,
shipbuilding, coal mining and textiles has been replaced by oil
and gas from the seas off Scotland with manufacturing shifting
in emphasis towards the hi-tech industries, such as electronics
and information technology systems.
The greatest success story has been Scottish finance.
Employment in this sector has expanded by some 40% since 1985 to
more than 200,000 - one in 10 of all Scottish jobs - and it now
contributes around 15% of Scotland's GDP (gross domestic
product), nearly three times the average for the EU.
It looks after over £100 billion of funds for an international clientele
and has pioneered portfolio-based savings products and
Scotland's four major clearing banks had total assets of
f96 billion as at December last year and have pioneered cash
dispensers, satellite payment systems and electronic banking
systems for domestic and business use.
The Clydesdale Bank has recently established three service
centres in Glasgow and Aberdeen to handle financial processing
and customer services, while TSB Scotland is investing
£15 million in a UK-wide telephone banking centre in Glasgow.
The banks also have an enviable record of success in
developing overseas. The Royal Bank of Scotland, for example,
operates in Spain, Belgium, Portugal and, most recently, Denmark
and the United States through its electronics funds transfer
system, developed with its partner, Banco Santander of Spain.
While the long-standing strength of all the banks, both
national and international , is in the retail and corporate
markets, a significant community of Scottish merchant banks has
also developed to reinforce effective service in the corporate
sector, increasingly active for both UK and international
Advice on mergers and acquisitions, flotations, venture and
development capital is available from a number of sources, each
with its own distinctive flavour and specialism.
At the end of 1995, the eight major Scottish life offices
had funds of £10 billion , 18.4% of all UK long- term life
assurance and pensions business and 24.2% of UK personal pensions
business. The sector employs over 20,000 people, a figure which
has more than doubled in 10 years. One of the Scottish life
offices, Standard Life, is the largest mutual assurance company
Like the banks, these companies too are developing overseas
with great success. Scottish Provident has operations in Spain
and Ireland and a subsidiary in Greece; Scottish Widows has a
joint-venture life company, Previasa Vida, in Spain; Scottish
Equitable operates a 100% - owned specialist cross-border life
assurance company in Luxembourg and in Italy it sells shares in
SI CAV, an open-ended investment trust company; and Scottish
Amicable has established an operation in Dublin to build business
in the EU.
Among the composite insurance companies in Scotland, the
largest is General Accident, one of the top five insurers in the
UK and ranked among the top 30 US property and casualty insurers.
A third pillar of the financial community is its specialist fund
managers whose portfolio funds under management has grown four-
fold in the past 10 years to reach 41 billion.
These managers derive mainly from what were the emerging
market funds of the 19th century - the investment trust movement
which was a vehicle for collective investment in North America.
Today around 25% of these trusts are managed from Scotland,
including two of the largest self-managed trusts, the Alliance
Trust and the Scottish Investment Trust.
Today, the fund managers have diversified, at home and
abroad, into different forms of financial vehicles, drawing on
other sources of funds most notably mandates from North
American pension funds - for management in markets around the
world. They have pioneered investment vehicles in such emerging
markets as India, Indonesia and Turkey.
A strength of the Scottish financial sector is that it can
draw upon a full range of supporting services. These include
stockbroking and market making (there is a unit of the London
Stock Exchange in Glasgow), private banking, accountancy, global
custody, corporate law, performance measurement, financial
printing, graphic design and public and investor relations
Scotland has the most complete financial business
infrastructure in the UK outside London and one which commands
nearly 70% of its nationally available market.
The Scottish education system is geared to meeting the needs
of the financial sector and remains responsive to them.
Telecommunications too has been driven by its requirements. With
the first-rate provision which Scotland enjoys, financial
business can be conducted to and from anywhere in the world.