The financial services industry won’t be destroyed by the automation apocalypse

FRANCE-FINANCE-STOCKS-MARKET-ILLUSTRATIONS
The pace of change suggests that most workers will need to retrain over a career (Source: Getty)

Overall, the UK labour market is responding remarkably well to automation, creating many high quality jobs, more than offsetting the impact of the ones automation is destroying.

But what about the impact of robo-advice, passive funds, peer-to-peer platforms, self-service distribution channels and branch closures on employment in financial services? How are the employment prospects in that market responding to automation?

Using the Office for National Statistics (ONS) detailed data, we have examined the different types of roles within financial services: which are growing, and which are declining.

Read more: Why the robot apocalypse won’t come tomorrow

The first surprising finding in the data is significant forced churn. Over the past five years, about one in six jobs (around 200,000) in financial services are new (i.e. job categories where employment grew), and a similar amount were destroyed (i.e. other categories where employment shrank).

These figures do not include the churn of people moving to the same type of job at another employer. So since 2011, at least one in six people working in financial services has been forced to change their role or leave the industry, which suggests a lot of dynamism.

We have drawn on Frey and Osborne’s 2013 study The Future of Work to assess the probability that a job will be automated.

Their study looked closely at the tasks involved in each job and drew on a wide range of academic input into the potential to automate them. It calculated the risk that such a job would be destroyed by automation over a 20-year period.

That report has been labelled “Robocalypse” because it said 47 per cent of current US jobs were at a high risk of automation. But such commentators have missed the dynamism by which the market creates new, more sustainable jobs. We have translated Frey and Osborne’s framework into the UK jobs market and looked at the trends.

Of the c. 200,000 jobs destroyed in financial services in the past five years, over two thirds were at high risk of automation (86 per cent probability on average). These included bank clerks (45,000 jobs destroyed), bookkeepers (9,000) pension and insurance clerks and assistants (9,000), and customer services representatives (14,000).

By contrast, about two thirds of the jobs created were high quality jobs, meaning that they have a very low risk (12 per cent) of automation. These were in growth areas such as specialised managers and directors, marketing, IT project managers, and software developers.

Overall, these new roles are at lower risk of automation than the average for the economy. This is a very positive finding and indicates that jobs in financial services are becoming more sustainable with respect to automation.

So far then, the financial services jobs market is responding well to automation with new, more sustainable roles being created in sufficient numbers to maintain overall employment.

Finally, the pace of change suggests that most workers will need to retrain over a career (towards IT, project management, marketing or compliance). And to keep up, major employers need to develop medium term skills plans to avoid risks to their business continuity by lacking key skills.

Read more: Nope, robots won't take over the world... AI could actually create new jobs

City A.M.'s opinion pages are a place for thought-provoking views and debate. These views are not necessarily shared by City A.M.

Related articles