“No one is saying to us that there’s any major job losses,” the Scottish Financial Enterprise chief executive said. Mr Begbie was speaking to Scottish Financial News about AI adoption, graduate hiring, the tax gap with the rest of the UK, and Scotland’s ambitions as a premier tier two financial centre.

Mr Begbie has led SFE, the representative body for Scotland’s financial services industry, since October 2020, following senior roles at the Royal Bank of Scotland, Scottish Power, Aegon and Standard Life Aberdeen, where he was chief people officer and lead executive for China and Hong Kong.

He was awarded a CBE in 2018 for services to business and social inclusion and elected a Fellow of the Royal Society of Edinburgh in 2023. SFE’s membership spans more than 100 companies, from global institutions headquartered in Scotland to local fintechs, and the organisation’s current growth strategy targets doubling assets under management to £1 trillion by 2030.

Mr Begbie told Scottish Financial News: “The reality is we work in a very highly regulated industry, and therefore: the adoption of new technology happens to be AI now, but it used to be other technologies before that.

“You are held to a very high standard around regulation and consumers, so we’re still very much in the test improve phase, which is, I think the best word to describe it is people are cautiously optimistic, but they’re still taking account of all the risks that sit around AI adoption.”

The boss of the organisation representing Scotland’s financial services sector admitted that there may be a “reduction in new entrant hires” in the future before pointing out it won’t be “cut back to nil”, explaining: “I think people are looking at different skill sets to bring into the organisation.

“Some of the larger firms have been very thoughtful around, if you stop that intake of early talent, then ultimately where do you get the senior leaders of the future? A lot of firms are looking at AI adoption at the moment through the productivity lens rather than the cost efficiency lens.

“So how do you redeploy people into higher value jobs and reskill them? The words reskilling, retraining come up all the time. How do you then redeploy people into more productive jobs?”

It led to Mr Begbie pointing out that universities and colleges needed their funding regimes changed in order to allow more “flexibility” in the types of degrees and solutions on offer to allow them to move away from the typical higher education route that might be better suited for law.

Mr Begbie claimed the financial services sector would be better suited to a graduate apprenticeship model that allowed young people to earn and study, particularly for those working in tech and data.

He said: “The graduate apprenticeship model is a great example for those looking to work in technology or AI… where people will join the workforce, they do their degree, but they’re working and earning at the same time.

“And actually, in an area like technology, that allows them to keep their skill set up to date and relevant, rather than just simply doing it purely through the further and higher education route.

“If you’ve got someone who’s been in your firm in an area of technology for six years and then, cyber, for example, is an area of growth then why would you not put them through a 12-month reskilling program on cyber, where they’ve already got a lot of the core skills that you need?”

Scottish Financial Enterprise is working hard to make Edinburgh and Glasgow the premier tier two centres in the UK to complement London to encourage global companies to set up a “regional hub” in Scotland, part of the strategy that also underpins the organisation’s £1 trillion AUM ambition.

He said: “Scotland has a strong proposition commercially because we are naturally a lower cost location than say, London. Salaries are lower, office property premises are lower, the cost of living here compared to a tier one centre is lower.

“And when you wrap around the fact that you’ve got talent and actually talent that remains with you for longer, it’s actually quite a compelling proposition.”

Mr Begbie pointed out JPMorgan and Barclays set up offices in Glasgow, adding: “These jobs don’t need to be in a tier one centre. They can be in a tier two centre. They’ve created regional hubs, and then obviously attracting the talent to come and work for them.”

On what underpins tier-two status more broadly, Mr Begbie explained: “There are a number of things that underpin a tier two centre and tier one centre, foundation assets that are quite difficult to replicate.

“Foundation assets would include things like rule of law, your regulatory regime, things like safety, housing, infrastructure. All these things are really important, and they’re not easy to replicate.”

He contrasted this with China: “They have obviously great infrastructure. But when it comes to something like rule of law, it’s difficult for businesses to do business there. Far harder there than it is to do here.”

When he was asked whether reduced police funding and rising crime in Scotland could undermine tier-two status, he said: “When you look at other locations that you’re being compared against: in some instances, despite some of the cuts.

“Scotland would still be considered both a relatively safe place to be, and also politically would be viewed as quite politically stable in comparison to other locations. That’s where the benchmarking’s really useful.

“I’m certainly not advocating for any reduction in funding on police. I think we do need to be really careful, and I think we have seen a rise of antisocial behaviour and some other things, and I think police need to be properly funded. We shouldn’t take our safety for granted.

“When you look at some of the up and coming tier two centres, in parts of, for example, Central America or South America, parts of Asia, then we would still be considered a safer location in comparison. But again, we shouldn’t take it for granted.”

Mr Begbie warned that the Scottish Government’s divergence on tax from the UK Government has “arguably gone too far” explaining that there is “evidence of it proving to be a barrier in attracting people to here.”

He added: “If you look at our employment numbers, they’ve gone up by 22,000 in the last three years. But there’s not a lot of evidence that a lot of people have moved to Scotland to fill those jobs. They tend to be jobs that have been moved from elsewhere and filled from within the local marketplace.

“Likewise, there’s not necessarily a lot of evidence that people have left at the moment in large numbers. But I think all the evidence would show that people are certainly changing their behaviour in order to try and mitigate the increase in taxes.

“So we’ve been pretty clear that, as far as we’re concerned, there is no further headroom on tax, and it is a constant topic that comes up.

“My concern is when you look at locations like Leeds or Manchester. Belfast is another one who’s attracted quite a full investment recently from Bank of America, and Citi, of course, have had a lot of people there for a long time.

“Those are the centres where they’re probably on a comparative, if not even lower, in a Belfast sense in terms of cost of living, and they don’t have the tax differential that we have. We need to be really, really careful. Ideally, we would like to see that tax differential removed and realigned with the rest of the UK.”