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Strong demand for finance specialists, skills gap at lower levels Back  
There is broad awareness among businesses, policy makers, trade unions and economic analysts that an urgent task is to plug the skills gap in the Irish economy. The picture for finance specialists, a sub-sector of information workers, is not as easily painted.
W ithin the context of a knowledge-based economy, the focus has been on an identifiable gap in technology skills. Relatively little attention has been paid to the quality or quantity of higher skills in the finance area, and perhaps justifiably so, thus far. The focus on technology is driven by the number of technology-based multinationals in Ireland and by the growing importance of the technology sector in internationally traded services.

It is accepted among analysts that there is also a need to populate the top end of the pyramid of employment in finance and accounting with people whose skills are internationally competitive in their field. The continuing demand for people with such skills comes from multinationals in manufacturing, growing Irish companies that compete for international capital, international financial services and domestic financial services providers.

The numbers may be lower than the amount of technologists required, but the need for highly-educated finance professionals will grow as the technologists develop more business.
Knowledge assets

The May 1999 report of the National Competitiveness Council set out the trends and needs of the economy in maintaining its competitiveness. It stated, “The nature of FDI (foreign direct investment) is changing in line with the shift in the competitive advantage of the Irish economy
towards higher value-added, knowledge-based activities.’

‘Industrial policy in Ireland must become more successful in fostering the production of so-called knowledge-based assets.’ The creation of these knowledge assets through investment in R&D and innovation, “is the strongest guarantee of long-term success in attracting high-calibre FDI’, according the NCC.

A strategy to increase skills levels for the economy generally is critical to maintaining competitiveness in this way. The 1999 report quoted a survey of multinationals located in Ireland which put human capital issues in six of the top ten factors which would affect their performance.

An ESRI/FAS study of areas where employers would like to see an improvement in skills among employees put “Basic ability that can be built on” and “Practical skills” top of the list. By contrast, financial services firms ranked ‘foreign language’ and ‘general communications skills’ as the areas where they would most like to see an improvement.

This points to a difference between the skills need in finance and the general need for upskilling among the workforce, as analysed from the broad perspective of the competitiveness of the economy.

Among the NCC’s recommendations for increasing skills, the one probably most relevant to the finance function was to do with raising enterprise investment in training, particularly among small and medium sized enterprises.

Assessing the skills gaps

Specific work on addressing skills gaps has begun under the Expert Group on Future Skills Needs. Its first report, issued last year, focused deliberately in the IT sector because that was where the need was judged to be greatest, with the best growth opportunities for Irish companies and foreign investment. The Expert Group also judged that the lead-time for skills required is longest ‘in high-skill sectors like IT’.

The Expert Group concluded that there is latent skills gap of technologists of 2,200 for the years
1996-2003, under a high growth scenario.

One could say that the finance function - both internal and external - services the IT business and if growth prospects are greatest in the IT sector, finance professionals who were well-versed in the characteristics of the sector will be in considerable demand.

Additionally, there is increasingly a blurring of rigid distinctions between finance and IT skills. Finance personnel must have well-developed skills to use, if not quite engineer, software.
It would be useful if a method for assessing future skills needs could be taken and applied to a sub-sector like finance. But planning for skills needs is not easy. As the Group said, ‘Matching the supply of skills with the potential future demand is a complex exercise.’

‘Ireland needs to develop a robust system for forecasting accurately and in detail the potential future demand for skills by type of skill and quantity. These forecasts will be a critical input into the investment in educational and training infrastructure. ‘

‘If we can accurately forecast future skills requirements, we will have a key success factor for continued growth. We will have the supply of skills available to continue to attract the growth industries. If we can make our skills forecasts correct and continue to plan our educational and training output to deliver the required skills, Ireland will have achieved a major competitive advantage. ‘

‘However, this is no easy task. The supply chain for providing new skills is from one to four years depending on the level of expertise required. There is a large element of uncertainty about the quantity and type of skills required four years hence.’

This judgement is likely to be as valid for finance as well as technology.

Finance-related job growth

The FAS/ESRI November 1997 report on employment forecasts stated ‘the employment levels for the group of professional workers as a whole is expected to expand by over 59,000, or 4.1 per cent on an average annual basis between 1995 and 2003.’

The occupational category of ‘business/finance/legal professionals’ was identified as that where most rapid expansion, at nearly 8 per cent, was expected. An additional 27,400 people were expected to be employed in the area, a level exceeded only by occupations categorised as
“clerks”, where 35,000 extra positions were expected.

These occupations will grow particularly ‘because they tend to be concentrated in the more rapidly expanding parts of the economy’, FAS/ESRI states, ‘and within sectors generally, they are assuming greater relative importance as time progresses’.

Anecdotal evidence suggests that these predictions for growth are being borne out. It has been estimated that 10,000 jobs are being created in banking, insurance and building societies this year.

Graduates working in finance

The first stage of supply of finance professionals is among graduates and post-graduate students in third level education. Professional qualifications in accountancy and tax are likely to follow after some third level education. The Higher Education Authority’s most recent survey of
the destination of award recipients provides an analysis of commerce and business studies graduates.

In 1997, there were a total of 2,222 recipients of primary degrees in commerce and business and 418 recipients of higher degrees. Of those, 54 per cent and 73 per cent respectively obtained employment in Ireland.

Table 1 shows that employment in financial and professional services dominated the destinations of these graduates.

Twenty-two per cent of graduates and 20 per cent of post-graduates who found employment did so outside Ireland, mainly in the UK. Of these, 38 per cent of graduates and 43 per cent of post-graduates were categorised as working in the insurance and financial area by the HEA.
‘Financial work’ dominates the type of work carried out by the Commerce and Business graduates working in Ireland straight after graduation. Forty-six per cent of graduates and 47 per cent of post-graduates were engaged in financial work, while the next nearest categories were relatively small, 10 per cent in ‘marketing advertising and public relations’ for graduates and 17 per cent in ‘management services’ among post-graduates.

Unsurprisingly, the vast majority of Commerce and Business graduates who found employment in Ireland did so in the east of the country, including Dublin. Eighty-six per cent of those with post-graduate degrees worked in the east.

Special courses

There is no definitive number of potential specialist finance professionals - accountants, business studies graduates, MBAs and MBSs - in the pipeline. Many of the courses providing the final stages of their education are not limited in number and adjust their intake to meet demand. A survey of post-graduate courses for finance professionals was included in last month’s Finance. The intake to these courses is set out in Table 2. At a general level, the National Council for Education Awards has calculated that 5,000 diplomas, certificates and degrees were awarded in Business Studies in 1998.

Demand in financial services

There is no single precise measure of the demand for finance specialists. The corporate sector, financial institutions, the professions, the public sector and academia all contribute to demand. In the financial sector, demand is naturally high for finance specialists. But, bearing out the judgement of the Expert Group on Future Skills Needs, the key concern of respondents to the Institute of Bankers’ survey on staffing and skills needs in April 1998 was the availability of IT specialists and middle to lower level staff.

Concerns were expressed in the report about ‘the availability of specialists in key areas such as accounting, finance, deal making and, notably, IT’. However, the report went on, ‘more significantly, there was widespread concern about the availability of staff for junior positions in administration and customer service.’

‘This was identified as the biggest single category of staff in the industry and concerns expressed about their availability influenced the focus of the project.’ Over 3,000 of the new jobs to be created in financial services over the years 1998-2001 were expected to be in this category, which would account for over sixty per cent of recruitment into the financial services industry.

Consequently, the main focus in the recommendations of the report were on means to develop relevant skills for the administration and customer service area, rather than higher-end finance skills.

Nonetheless, the report indicated that 68 per cent of employers in the financial services sector agreed or strongly agreed that graduate recruitment had been ‘a vital element in their recruitment strategy’. Nearly all agreed that graduate recruitment ‘must be supported by a structured development programme’.

The report pointed to a projected increase of 102 positions between 1997 and December 2000 at intermediate and senior level for what were called “Other Specialists”, that is, outside of IT and administration or customer service. Turnover of existing staff could add another 100 positions to be filled.

Counting the financial services industry as a whole, funds administration and IT were the areas of greatest projected growth identified in the report. For senior, non-IT, specialists, growth of 25 per cent was expected in funds administration, 24 per cent in life and pensions, 11 per cent in capital markets / corporate banking, but there was expected to be a fall of nine per cent in the area of retail credit institutions.

IFSC - skills and staff gaps

According to the Institute study, the IFSC would see a higher growth rate in than the rest of the industry, at a rate of 23 per cent between 1997 and 2000. Nearly all the increase in employment for ‘Senior - Other Specialists’ identified in the survey was at IFSC companies. The areas of growth in the IFSC were projected to be funds administration and capital markets/corporate banking. Employment in the IFSC was 6,000 at the end of 1998 and it now may be closer to 7,000.

Following the Institute of Bankers’ study, the consulting firm, Prospectus, reported to the Department of the Taoiseach and the Financial Services Industry Association in April this year on strategies to deal with skills and staff shortages at the IFSC. These were accepted to be primarily at the lower level. Indeed, the purpose of the study was to assist in migrating recruitment at the IFSC from graduates to Leaving Certificate and mature re-entrants to the labour market. Turnover in IFSC staff, at an average of 16 per cent but peaking at 22 per cent for intermediate level specialists, has been unusually high, due largely to recruiting over-qualified graduates for entry-level positions.

Some of the skills gaps identified at the lower level positions in the IFSC included a broad understanding of the domestic and international financial services industries, of foreign currencies and financial instruments and of the activities in the IFSC. Skills and knowledge gaps at the low to middle levels in relation to specific areas of the IFSC - treasury, funds and insurance - were also identified. Prospectus recommended that specific IFSC-related training courses be developed through industry partnership with existing education providers, especially those which were publicly-funded. Prospectus said there should also be a marketing plan to promote job opportunities and the IFSC courses to potential entry-level staff.

Recruiting finance specialists

If there are shortages in the supply of suitably-qualified finance specialists, these are being met by recruitment from abroad. The labour pool available for this small, but critical, sub-sector of the economy is not confined to Ireland. This has been the pattern for higher-end specialists for some time, but is now also the case in the increasingly desperate search for middle and entry-level funds administration specialists for the IFSC.

The picture of a big pool of finance specialists available to Ireland from abroad has to be refined, according to Brendan Murphy of Osborne Recruitment. ‘While there is a theoretical over-supply of finance professionals in London, for example, from which the IFSC can draw’, he points out, ‘often, in practice, key people at the higher levels are not available when the demand from the Irish firm is acute, or there may be no vacancy when a London-based Irish person is thinking of returning to Dublin’. Many London specialists have three-month notice periods and this can be frustrating to Irish employers. The cost of housing in Dublin and the inevitable cut in remuneration also limits the availability of the high-end pool, he says.

It is generally accepted among recruitment firms that a skills gap in terms of training and education is not a problem. There is, however, a premium to be earned by finance specialists for international, relevant experience, which means that the pool of available specialists is always going to be wider than that in the local economy.

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