A new report entitled, "Shaping our Economy," reveals that socio-economic background plays a more significant role in determining one's trajectory in the financial services sector than gender or ethnicity.
Commissioned by the membership body Progress Together, this report is the largest study ever conducted on socio-economic diversity and progression within UK financial services. It builds upon previous research that highlighted the stark pay gap within the industry and the lack of socio-economic diversity across the workforce.
"Socio-economic background" encompasses the unique social and economic circumstances in which an individual grew up. This can be objectively measured by considering factors such as the type of school attended, eligibility for free school meals and parents' occupation and educational level.
Progress Together, formed in 2022 as a result of a government-commissioned taskforce, is dedicated to supporting its member firms in tracking and improving socio-economic diversity at senior levels in the financial services sector. With over 30 member firms representing a significant portion of the UK's financial workforce, Progress Together is making strides in addressing this crucial issue.
Financial services are a cornerstone of our society, employing over 1.1 million people in the UK, with the majority working in banking and insurance. In the most recent year, the sector contributed £275 billion to gross value added (GVA), underscoring its vital role in the economy.
The report - based on data from 25 Progress Together member firms and encompassing 149,111 employees - highlights several concerning trends:
Lack of Representation: On average, member firms are unrepresentative by socio-economic background compared to the broader UK workforce. Approximately 50% of employees in these firms come from a higher socio-economic background, compared to 37% in the UK workforce.
Disproportionate Senior Representation: Individuals from higher socio-economic backgrounds are more than twice as likely to hold senior roles within these firms. This lack of diversity extends to the progression rate, with those from higher socio-economic backgrounds advancing more quickly.
Gender and Socio-Economic Background: Gender disparities compound the issue. Women from lower socio-economic backgrounds take 21% longer to progress to senior roles, compared to their counterparts from higher socio-economic backgrounds.
The report identifies three primary factors contributing to the lack of socio-economic diversity in senior roles:
The Pipeline: A lack of diversity at junior and middle-management levels limits the pool of candidates eligible for senior positions.
Unequal Progression Rates: Individuals from higher socio-economic backgrounds advance more rapidly, creating an uneven playing field.
Experienced Hiring: The recruitment of experienced professionals often perpetuates the existing lack of diversity rather than improving it.
The report offers several key recommendations to address these disparities and promote socio-economic diversity within financial services:
Data Collection: All financial services firms should collect socio-economic background data from their permanent workforce and regulators should advocate for this practice.
Data Utilization: Firms must use collected data to drive meaningful change in their diversity and inclusion initiatives.
Focus on Experienced Hiring: Greater attention should be paid to diversifying experienced hires to break the cycle of homogeneity.
Impact Evaluations: Firms should establish robust impact evaluations to identify and implement practices that have the most positive effect on socio-economic diversity and inclusion.
The "Shaping our Economy" report sheds light on the pervasive issue of socio-economic background shaping one's journey within the financial services sector. This report is a crucial step towards a more inclusive and equitable industry. By heeding the recommendations outlined in the report and taking concrete actions, financial services firms can work towards a future where success is determined by merit and not by one's upbringing.
