Financial services failing on socio-economic diversity

A taskforce charged with improving the socio-economic diversity at senior levels in financial and professional services across the UK has been launched by the UK Government.

The independent taskforce, commissioned by HM Treasury and BEIS and run by City of London Corporation, has been asked to focus particularly on boosting representation at the top of these sectors.

It comes as research commissioned by the City of London Corporation and authored by the Bridge Group, found that almost nine in ten senior roles in financial services are held by people from higher socio-economic backgrounds. This compares with a third of the UK working population as a whole.

The report – which draws on data from eight major employers in the financial services sector – also found that employees from less privileged backgrounds take 25% longer to progress, despite no evidence of poorer performance.

To tackle the lack of socio-economic diversity at all levels, the taskforce will:

  1. Lead an industry consultation on how government, regulators and sector bodies can incentivise firms to take action to improve socio-economic diversity.
  2. Create a membership body for financial services, where employers can benchmark against each other and share best practice on delivering socio-economic diversity at senior levels.
  3. Produce a productivity analysis, to build the business case for increasing socio-economic diversity at senior levels in financial and professional services.

“We’re entering a new chapter for UK financial services and it’s vital that firms have the right leadership to grasp the opportunities ahead,” said John Glen, City Minister and Economic Secretary to the Treasury. “That means taking action to ensure that talented people from all backgrounds and parts of the country can reach their full potential. By breaking down socio-economic barriers to progression, our financial services sector will become more innovative and competitive, and help to level up the UK.”

The research report on socio-economic diversity in financial services highlighted a clear a lack of representation:

  • 51% of respondents at all levels of seniority were from a higher socio-economic background (as defined by parental occupation). This compares with 33% of the wider working population.
  • 16% of the survey respondents attended an independent school – over double the national figure of 7.2%.
  • Among junior employees, 47% were from a higher socio-economic background by parental occupation; and 11% were educated at an independent school.
  • For senior level employees (senior manager and above), this rises to 89% and 25% respectively.
  • Just under half (42.7%) of senior roles were occupied by white men who attended an independent or selective state school.
  • Employees from lower socio-economic backgrounds took 25% longer to progress through grades. This ‘progression gap’ increases to 32% when considering those from lower socio-economic backgrounds who also identify as black.
  • This ‘progression gap’ cannot be explained by performance. There was no statistical evidence to link performance with socio-economic background.
  • Those from lower socio-economic backgrounds frequently expressed that they spend time and effort on assimilating to dominant higher socio-economic cultures. This is likely to have serious implications for individual and organisational productivity, and wellbeing.

The taskforce will be chaired by Catherine McGuinness, Policy Chair at the City of London Corporation and three Co-Chairs: Sandra Wallace, Interim Chair of the Social Mobility Commission, Andy Haldane, Chief Economist at the Bank of England, and Alderman Vincent Keaveny, Senior Alderman at the City of London Corporation.

“Talented individuals should be able to succeed in financial and professional services on their own merit regardless of socio-economic background. Unfortunately, for many people that does not yet seem to be a reality,” explained Ms McGuinness. “There is a clear business – as well as moral – case for improving diversity across the sector. This research demonstrates that people from lower socio-economic backgrounds face greater barriers to progressing throughout their career.

“We hope that firms will seize the opportunity the taskforce provides to develop a more diverse pipeline by ensuring they are truly recruiting and promoting on merit.”

“We know that there is a strong business case for greater diversity across the board, and are acting to support talent irrespective of gender, ethnicity or people’s family and educational background,” commented Business Minister Nadhim Zahawi. “No sector of the economy should be closed off to people from less privileged backgrounds, which is why we are building a Britain that is open to talent and helps people from all walks of life to excel in their career.”