The Growth of the Scottish Financial Sector

Abstract

The problem for any UK regional financial centre is the difficulty of combating the powerful centripetal force of London, a problem that manifests itself in terms of both retaining existing institutions and attracting new institutions to a region. Low costs offering economies of scale, particularly in processing, can go some way towards attracting certain operations of financial institutions to the regions, but policy making and management advisory functions typically remain elsewhere. Accidents of history, in particular separate legislation from England that did not discourage innovation in banking, together with the need for local knowledge in selling and appraising insurance risks, led to the development of a distinctly Scottish regional financial sector with a substantial presence in banking, life assurance (and to a lesser extent general insurance) and investment (particularly investment trusts).