The new threat to investment operations roles in Scotland – outsourcing

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Call it paranoia, or a natural conclusion in the current straitened times, but there's an increasing school of thought among people working in the investment operations sector north of the border that more jobs are likely to gravitate towards Eastern Europe.

Performing operational functions in Eastern Europe is nothing new and a number of banks with offices in Scotland also carry out certain functions there. The likes of State Street, Citi, Credit Suisse, UBS, BNY Mellon and Franklin Templeton all have offices in Poland in locations as diverse as Warsaw, Wroclaw, Kraków, while Morgan Stanley has business services and technology centre in Budapest.

However, more people working in the industry seem convinced that Barclays' decision to outsource  65 roles to India in October is indicative of an increasing trend towards banks and financial services firms offshoring operational functions to cheaper locations.

"Outsourcing is definitely going to pick up in 2012, and some of the less demanding functions – like reconciliation or processing of vanilla products – will definitely be heading elsewhere," says one investment ops professional in Glasgow.

The likes of Citigroup, for example, stripped out transactional functions from its Edinburgh operation, so that it just carries out more high-end fund accounting roles.

"Some of the big players with a significant presence in Scotland are carrying out various tasks in Poland and other Eastern European locations; not just the low end functions, but more sophisticated work is also carried out there," adds Alan Thornburrow, chief executive officer of Scottish Investment Operations. "I don't know what the future holds, but none of our members are talking about any mass migration of roles away from Scotland."

SIO was, however, promoting its industry qualifications in Poland recently, he adds, which suggests that there's an appetite to increase the skills base in Eastern Europe. Scotland has something of a head start in this regard, however.

"It's a much less mature market in Eastern Europe than in Scotland, and there's a greater depth of expertise here, with the ability to service a greater variety of more complex product types," says Thornburrow.

There's also the fact that Scotland has won out in recent battles over where to locate operational functions. Morgan Stanley, for instance, looked at the possibility of carrying out more work in Budapest but decided instead to centralise its operations in Glasgow, where it's been expanding ever since.

"I would argue that it's just low-value functions being carried out in Eastern Europe, and not the sort of value-add jobs that you could develop a viable career around," adds one senior executive within an investment ops in Glasgow. "There's not much longevity in these roles, particularly with the increasing focus on automation which will ultimately mean reducing headcount in these areas."

"We need to embrace the competition, rather than fight it," adds another senior investment ops professional. "We're seeing more people transfer to Glasgow from Eastern European locations, and more aspiring to do so, which shows that we still have the edge. There's also the fact that when you work for a company where English is the business language, a UK location always has an advantage."

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