A walk around St Andrew’s Square in Edinburgh 30 years ago would have presented the stroller with a range of shop fronts, displaying what would have been familiar names in Scottish financial services.
Scottish Life, Scottish Amicable, and Scottish Mutual would have been among the companies that then dominated the square – but they are no longer visible.
However, that square still houses the headquarters of Abrdn, while the neighbouring Melville Square and George Street are home to companies that run billions of pounds of assets on behalf of clients across Scotland and the world.
Scotland’s heritage as a financial hub arguably goes back to Adam Smith, considered one of the founding fathers of modern economics and a one-time lecturer at the University of Edinburgh.
It also has a rich history in insurance; for example, the Scottish Ministers’ Widows Fund, which was founded in 1748, was the first company ever to provide life insurance.
But as scale grips the financial services industry, and globalisation has shaped the world over the past 30 years, what impact has there been on Scottish financial services and the traditions that built it?
A heritage that lured M&A
A representative of Abrdn Asset Management says the history of financial services in Scotland goes back many centuries.
As a result, it has had a significant effect globally.
They explain: “It helps to define modern financial services across the world.
"Scotland has developed an extremely strong infrastructure for financial services businesses over many decades, including a highly mature ecosystem of adjacent service providers, a range of world-class universities and an extremely strong talent base to draw from.”
Mark Polson, founder of consultancy firm the Lang Cat, which is based in Edinburgh, says: “Although there is less visibility in the square now, the firms are still around. Edinburgh is still a financial services hub."
He notes that overseas and English companies were keen to get a foothold: "Aegon bought one of the traditional businesses as its way into Edinburgh, and Royal London bought one.”
This has led to consolidation, although both of those firms continue to maintain a strong presence in Edinburgh, albeit Aegon’s office is in an industrial park near the airport, rather than in the traditional financial centre.
James Budden, head of retail distribution at another of the long-established Edinburgh firms, Baillie Gifford, says one of the reasons for the consolidation of the financial services industry in Edinburgh is there is now more complexity.
He explains: "Asset management is a much more complex business than it was in the past, with more regulation, and of course that drives firms to consolidate.”
Regulation has certainly had an effect, according to Alan Reid, director of Waverton Wealth.
He says: "The level of red tape that has come into financial services has not helped. But I would also say, it can be a case that there are simply too many firms, and consolidation is needed.
