In collaboration with the Social Mobility Foundation UpReach
Read our submission below:
Social mobility is poor in the UK compared to many other developed nations. Defined by the Social Mobility Commission, social mobility is “the link between a person’s occupation or income and the occupation or income of their parents”1
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Socioeconomic background, which allows us to measure social mobility, is often described as the invisible social characteristic. Employers are aware of the barriers that can arise due to a person’s gender, ethnicity, disabilities, and other characteristics, as these are enshrined in the Equality Act. Socioeconomic background can create similar barriers, but those from lower socioeconomic backgrounds are not protected at work by the Equality Act, so employers often overlook it as something that can create unique challenges for their workforce and impact the economic success of their business. Industry body Progress Together has found that socioeconomic background is more likely to impact a person’s route to success in the financial services sector than gender or ethnicity. Women can face a ‘double disadvantage,’ with those from working-class backgrounds progressing 21% more slowly into senior roles than women from more advantaged families4
The problem in the financial services sector is especially stark. About nine out of every 10 senior roles in the financial services sector are held by someone from a higher socioeconomic background, this disparity has led to a class pay gap where those from lower socioeconomic backgrounds earn on average £17,500 less than their colleagues. That is the largest sector pay gap in the country5
There is now a lot of evidence to show that socioeconomic diversity can be a lever to gain competitive advantage through access to a wide talent pool, improved innovation and customer understanding, and saving the costs associated with workforce attrition. This was explored extensively by a City of London taskforce, which aimed to improve socio-economic diversity at senior levels in UK financial and professional services. The taskforce concluded in 2022, and its business case6
Investors are also increasingly interested in socioeconomic diversity. Richard Oldfield, Group Chief Executive at Schroders, and a founding partner firm of Progress Together highlights this: “We have seen a significant increase in enquiries from investors about socio-economic diversity in the last 12 months. Importantly, our focus on broadening talent has positively impacted our culture within the firm. Everyone should feel they belong and that they can progress in their careers, regardless of their starting point in life”13
Without talented and motivated employees, businesses will struggle to be competitive. The Financial Services Skills Commission suggests that 260,000 highly skilled people are expected to leave the financial sector in the next decade14
Looking more broadly at the economy and workforce beyond the financial services sector, a new Demos report published last month explains: ‘lower social mobility means many people in the UK are not making full use of their talents and developing their skills, and that job-matching is not as strong as it could be. This acts as a drag on productivity and economic growth – both perennial challenges for the UK economy’15
Considering the challenges the UK economy faces, it cannot continue to squander talent by privileging those with ‘polish’ and overlooking those who have potential, but who don’t have the knowledge, confidence, cultural experiences or networks to pursue a professional career in the financial sector. Businesses that are more socioeconomically diverse have been found to be more profitable – ‘the profits of organisations focusing on social mobility are 1.4x higher than their competitors. Put simply, companies which prioritise inclusion improve their talent pool: they broaden it, by bringing different attributes, skills and mindsets into the organisation; and they deepen it, by allowing more of their people, to be more productive, more of the time’16
People from higher socio-economic backgrounds are more than twice as likely to be found in senior roles compared with those from lower socio-economic backgrounds, according to Progress Together17
Demos’ analysis also finds that: ‘the economic impact of all businesses investing significantly in the promotion of social mobility in their workforce would be £19 billion to GDP, generating around £6.8 billion in yearly tax revenues and boosting profits by over £1.8bn a year’18
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In September 2023, the FCA and PRA opened a consultation called Diversity and Inclusion in the Financial Sector – Working Together to Drive Change20
The Labour Party, before entering Government, made it clear in their Financing Growth Plan21
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84% of Progress Together members agreed that regulators should compel employers to report data on the socioeconomic background of their employees24
While clearly many in the financial services sector recognise the business case for attracting and promoting diverse talent – including diversity of thought, innovation, and improving profitability – we need more to do so. If the FCA and PRA are to meet their secondary growth and competitiveness objectives, they must move away from the status quo and lead the sector towards improving social mobility. This must start with mandatory socioeconomic background data collection for all financial firms they regulate above 250 employees.The Socioeconomic Gap in Financial Services
The Business Case for Socioeconomic Diversity
Stronger Businesses through Diversity
The Need for Action: How the FCA and PRA Can Help
Addressing the Socioeconomic Diversity Deficit
Mandatory Reporting of Socioeconomic Background Data
Conclusion: The Path Forward for Financial Services
Footnotes