Brexit. One little word with a lot of complications. When Theresa May triggered article 50 in March 2017 propelling the UK on the path to separation, it was "an historic moment from which there can be no turning back". Whether you cheered jubilantly at the thought of breaking away, or wept for days on end, Brexit has more implications than anyone could have foreseen, particularly in the financial sector.
Once the adrenaline drains away and the dust begins to settle, financial service outsourcers across the land realise they are staring into the depths of a very real talent gap. Reduced access to international employees and an overall skills drain in the pensions administration sector could significantly restrict supply. But is offshoring the solution?
Keeping jobs in the UK
The answer to that question, rather like anything related to Brexit, seems to be inconclusive, depending on whom you ask. On the one hand, offshoring administration services has fallen out of fashion. Members have had their fill of faraway call centres and inefficient processes, spelling out their surnames three times and having the line cut off. According to specialised recruiter Robert Half Financial Services, UK financial firms are actually bringing their offshore operations back home, despite Brexit.
Rising costs coupled with substandard services, an increased need to improve service quality and customer responsiveness are driving the tendency behind onshoring. In fact, as per the research, as many as 59 percent of the UK’s financial services executives have been increasing their level of onshoring over the last two years, compared with just 4 percent who have powered ahead with offshoring.
Moreover, uncertainty remains over the impact the UK leaving the EU will have on the outsourcing industry. With limited movement and restricted access to lower cost labour, one could assume that employment costs will be driven up. It’s no surprise that 73 percent of the outsourcing industry were against Britain leaving the EU: Dissimilar privacy laws could make outsourcing more difficult to implement between the UK and other countries.
The talent shortage
With fewer jobs going offshore and less talent coming in, Brexit could result in further labour shortages in the pensions sector, an industry already struggling to resource contracts and attract people to the market. According to Valuation Expert, Toby Clarence-Smith, one of the major fallouts of Brexit is the danger of a “brain drain.” Prestigious brands like Goldman Sachs are already struggling to attract talent and applicants for their apprenticeships.
As a world financial centre, London boasts a critical mass of world-class talent living in close proximity to its institutions. Brexit threatens the talent ecosystem, as visa uncertainty and a resounding lack of clarity all round cause foreign candidates to look elsewhere. According to LinkedIn UK’s Head of Talent Solutions, Jon Addison, Brexit will cause a severe talent shortage in the UK, with the financial services sector among the hardest hit.
LinkedIn analysed 3.5 million users to see the impact of Brexit on the attractiveness of UK jobs to international talent. Interest had fallen by 10 percent; and 18 percent from EU talent. Job seeking in the financial sector in Britain is down by 12 percent overall. To complicate matters further, a PwC report found that if the current visa system were extended to migrants from the EU, as many as three quarters would not meet the criteria.
This is alarming to those of us in providing outsourced pension services, considering that approximately 28 percent of the graduate talent pool comes from foreign students with less than four years working in finance, largely due to a decline in Science and Maths education in the UK.
Despite a reluctance from trustees and pension managers to send administration services overseas and the potential complications that Brexit may unleash, could offshoring be the only way to meet the talent shortage? Does Brexit mean we will have to fall in love with offshoring again as a vital part of future pension administration service provision?
According to Raconteur, Brexit could mean a significant rise in offshoring, but as with everything related to the EU divorce, only time will tell. Financial services companies looking to keep talent at home will have to set the wheels in motion now.
The alternative to offshoring
The alternative to offshoring starts with internalising. Pension administration providers need to assess their talent pipelines to understand the skills that international talent brings, and how affected they will be when this is restricted. The next step is to start implementing training campaigns for existing staff, therefore strengthening their domestic talent pipeline.
Many pension administrators broke up with offshoring for a reason, and it is rarely a good idea to get back with an ex. If pension administrators adjust their recruiting policies and make an effort to foster domestic talent and teach new skills, we may not have to fall in love with offshoring again. At least, not for the time being.