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Number of boutique financial services start-ups growing at their fastest rate since the recession

According to research by SJD, there are currently 25,210 boutique financial services businesses in the UK, a 12.2% increase on the previous year when there were only 22,470 active enterprises. This compares favourably to the UK economy as a whole, which has seen the number of enterprises across all sectors increase by just 3.2% over the past year, from 2,372,960 to 2,448,745.

The rapid growth in boutique financial services includes hedge funds and private equity funds, brokerage firms, and financial technology businesses. However, the number of banks and other lenders fell by 15.8% in the past year alone, from 920 to 775 active enterprises.

By contrast, the research by SJD shows that the number of financial services jobs is still 8.5% lower than at the start of the recession, falling from 964,000 roles at the end of 2008 to 882,000 at the end of 2014.

Simon Curry, CEO of SJD Accountancy, comments, “The fallout from the financial crisis has led to a surge in start-ups in the financial services sector, and the recovery in the economy is adding momentum to this trend.”

“A combination of regulation and the need to rebuild balance sheets has seen large financial institutions shrink non-core business units. Many banks and insurers scaled back their private equity funds, for instance, with many in-house buy-out teams departing to set up their own funds. With MiFID II on the horizon, we are now seeing the same happening with analysts leaving banks to set up their own research consultancies.”

He adds, “We are also seeing banks re-engage former staff as contractors. People who left full time employment during the recession to set up their own advisory businesses often prefer the lifestyle and the end user benefits from flexibility and reduced costs.”

SJD Accountancy says that the increase in the number of boutique financial services businesses is also partly attributable to teams leaving larger institutions during the recession due to redundancies, slow pay growth and restricted promotion opportunities.

Curry continues, “The growth of niche financial services businesses, often headed by former staff from much larger firms, has been notable over the last few years. It is much easier than it used to be for a team with a proven track record to start up their own fund or family office, particularly with the cost of IT infrastructure much more affordable.”

SJD Accountancy says that there has also been a rapid growth of financial technology start-ups in the last few years, with many of these businesses moving into parts of the banking business that would have been served by larger institutions pre-crisis.

Curry concludes, “Digital technologies are disrupting and transforming the financial services industry and it is often the smaller, nimbler start-ups leading the change. The large institutions are increasingly alive to the opportunities, but it’s akin to turning around a super-tanker.”

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