PwC warns poor financial regulation will hit jobs and advice availability

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A well regulated financial services sector could see over 250,000 new jobs created by 2020 but current regulatory reform is restricting financial advice and product availability, according PricewaterhouseCoopers analysis.

In a report published today, PwC said a financial services sector which was well regulated would also add about 2-3 per cent GDP growth by 2020 with 47,000 new financial services jobs and around 218,000 in the wider economy. 

However, it says poorly regulated financial services sector combined with poor economic growth would mean only an additional 12,000 jobs would be created by 2020 and a much smaller rise in GDP of just 0.2 per cent would be seen.

PwC UK financial services leader Kevin Burrows warns “many aspects of financial services reform are currently constraining the advice and products financial services institutions can offer to customers”, making competition improvements in the sector difficult to achieve.

He adds: “Our analysis suggests that the links between the financial services sector and other sectors across the UK economy are strong.

“This shows the important contribution the sector makes to the UK economy across all regions, but also highlights the profound effect that financial services regulation or changes in financial services performance can have on non-financial services business.”

PwC economists based their analysis on two scenarios designed to represent the potential future path of financial services in the UK.

In the first scenario it was assumed that there was a “robust regulatory regime that facilitates financial services sector growth”, with “economic conditions that are also beneficial to the FS sector”.

The second scenario assumes the financial services sector is “constrained by weaker economic conditions”, as well as a regulatory environment that “does less to facilitate growth” than in scenario one.

Of the potential 265,000 new jobs that could be created if scenario one comes to pass, PwC expects around 132,800 to be based in London, with a further 24,000 in the South East.

The areas to benefit the most by new job creation outside of London are the North West and South West, with 19,400 and 16,800 new jobs created by 2020, respectively.

However, the North East, Scotland, Wales and Northern Ireland are unlikely to benefit to the same extent, according to PwC, with just 4,800, 7,200, 5,200 and 2,900 jobs created by 2020, respectively.

In March, Money Marketing revealed the number of IFAs and tied advisers operating on the first day of the RDR was 20 per cent down on December 2011 figures while the number of bank advisers fell 44 per cent. The total number of retail investment advisers fell 23 per cent from the 40,566 estimated by the FSA at the end of 2011 to 31,132 at the end of 2012, the first day of the RDR.

FSA estimates suggest there were 25,616 IFAs, tied and multi-tied advisers in December 2011, of which 21,696 were IFAs. This fell 20 per cent to an equivalent 20,453 advisers after the RDR deadline. The FSA is unable to give a split for IFAs.

The number of bank and building society advisers fell by 44 per cent from an estimated 8,658 in 2011 to 4,809 post-RDR. Since these figures were revealed, Santander, Axa and Aviva all announced they were scrapping their advice arms.