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The “class ceiling” restricting people with poorer backgrounds from working in UK financial services would be broken if companies were forced to report on the socio-economic roots of their staff, leading social mobility organisations have told regulators.
Economic growth would be increased, risk-taking enhanced and consumers better-served if financial services companies had more staff from less privileged upbringings, the organisations said in a letter to the UK’s top financial watchdogs.
The letter — from the heads of upReach, the Social Mobility Foundation and Progress Together — calls on the Financial Conduct Authority and the Bank of England’s Prudential Regulation Authority to make it mandatory for the companies they supervise to report on the socio-economic backgrounds of their employees, based on the jobs of their parents.
“Growth is at the heart of the new government’s agenda, and it is committed to ‘shattering class ceilings’, recognising the strong link between opportunity and productivity,” the trio said in their letter, which has been seen by the Financial Times.
“We collectively believe that this data is essential for not only addressing systemic inequities in the financial services sector, but also driving growth in the UK economy,” they said.
The letter shows that campaigners believe this year’s election of a Labour government has revived their chances of forcing the City of London to report on its socio-economic diversity.
The push for the UK to do more to advance social inclusion comes as US companies are accelerating their retreat from diversity and inclusion initiatives amid an all-out assault from conservatives emboldened by the election of Donald Trump.
It is unclear if the UK government will support making such reporting obligatory in financial services. The Treasury said it was “looking forward to the next steps” to be taken by the regulators after their consultation on the issue last year.
While still in opposition, the Labour party said it would consider “expanding the focus” of regulators’ efforts to tackle diversity and inclusion in financial services “to include socio-economic diversity”, as part of a plan for the sector published in January.
The UK’s regulators are already under pressure from the new administration over their role in boosting economic growth. Prime Minister Sir Keir Starmer told international executives at a recent investment summit that he wanted to “make sure that every regulator in this country . . . takes growth as seriously as this room does”.
Almost 90 per cent of senior employees in British financial services groups come from a higher socio-economic background, based on a survey of nearly 8,000 employees of financial services companies and regulators by the Bridge Group, a research firm.
People from privileged backgrounds working in UK financial services earned £17,500 a year more than colleagues from working-class families, according to Sam Friedman and Daniel Laurison’s book The Class Ceiling: Why it Pays to be Privileged.
Last year, the FCA and PRA proposed the introduction of a “voluntary reporting requirement” on the socio-economic background of staff for financial institutions, while forcing them to report other data, including age, ethnicity, gender, religion and sexual orientation.
That consultation stopped taking feedback a year ago and the regulators are aiming to publish their final rules around the middle of next year.
The letter pointed out that the FCA and PRA would be forced to consider the impact of their decisions on socio-economic inequality if the government fulfilled its manifesto pledge to require all public bodies to take this into account.
About a third of financial services employees already have their socio-economic data reported anonymously to Progress Together. It found the careers of people from working-class families progressed 25 per cent more slowly than their more privileged colleagues, despite similar performance.
Law firms have had to report the socio-economic background of their employees to the Solicitors Regulation Authority for more than a decade.
Improving social mobility in the labour market could boost UK gross domestic product by £19bn, increase annual tax revenues by £6.8bn and lift profits by over £1.8bn a year, according to a recent report by the Demos think-tank and the Co-operative Group.
