The hidden costs of the IT skills gap for UK financial services

By Charlotte Webb, Operations Director at Hyve Managed Hosting

The financial services sector has historically had a complex relationship with the new technologies. While many organisations have traditionally focused on front-end, customer-facing products, the back-office systems that actually drive critical operations have often been less prioritised. This imbalance has left financial institutions struggling to keep pace with the rapidly evolving digital landscape, making it harder to retain top IT talent. Skilled professionals often choose industries that offer more opportunities to work with cutting-edge technology, exacerbating the talent drain.

The growing IT and tech skills gap in the UK market further intensifies this challenge. For years, the UK has faced a significant shortage of highly skilled IT professionals. This lack of talent makes financial institutions even less appealing to tech professionals, who are in high demand these days. As a result, these institutions scramble to fill critical roles, such as cloud computing and cybersecurity, while facing stiff competition from other sectors, particularly larger tech corporations that offer attractive salaries and innovation-focused environments.

These factors together represent the hidden costs to organisations, with the consequences of the talent shortage going far beyond rising salaries and recruitment challenges. They are quietly undermining operational efficiency, compromising cybersecurity and stifling innovation, ultimately threatening the long-term competitiveness and resilience of the entire business and impacting the sector as a whole. In this article, we explore the three most significant hidden costs this situation is imposing on the UK financial services industry and outline actionable strategies to effectively address and mitigate these challenges.

Infrastructure outages and downtime

A shortage of skilled IT staff increases the risk of operational disruptions, including system outages and downtime. Research indicates that 20% of businesses have experienced outages and data breaches due to inadequate staffing. That translates to lost productivity, delayed service delivery, and ultimately, damage to customer trust and retention.

The impact of downtime is often more pronounced for larger enterprises, but any size and type of financial organisation should be concerned about downtime. Following the CrowdStrike incident earlier this year, the UK's financial watchdog has urged firms to strengthen their defences against major tech disruptions. Firms must prove their resilience to such events this year, further intensifying the fight for skilled cloud talent.

Security vulnerabilities

With cyber threats becoming increasingly sophisticated, inadequately trained or lacking staff, security teams need help to keep pace. Critical vulnerabilities may go unaddressed, leaving businesses exposed to potentially devastating breaches. This is exacerbated by the increasing complexity of IT systems, with the rise of cloud computing, mobile banking, and the Internet of Things (IoT) expanding the potential attack surface.

Without sufficient expertise, financial services organisations may struggle to implement robust security protocols, monitor for threats effectively, and respond swiftly to incidents.

This is particularly concerning for the financial services sector, which handles vast amounts of highly sensitive customer data. A report by RPC revealed a staggering threefold increase in cybersecurity breaches reported by financial services firms to the Information Commissioner's Office (ICO) over the last couple of years. This surge underscores the escalating threat posed by cybercriminals to the sector, highlighting the urgent need for robust cybersecurity measures.

This incident highlighted the severe consequences of inadequate security expertise in the financial sector, including regulatory fines, legal action, and irreparable damage to reputation. Moreover, security breaches erode customer trust, leading to loss of business and long-term reputational damage.

Stifled innovation

The skills gap hinders the adoption of new technologies, impacting competitiveness and customer experience. Overburdened and under-skilled teams may struggle to respond effectively to customer needs and market shifts.

This can lead to a decline in service quality and an inability to offer personalised solutions, further eroding customer satisfaction. Furthermore, lacking skills in emerging areas like artificial intelligence, machine learning, and blockchain can prevent financial institutions from capitalising on new opportunities and developing innovative products and services.

This inability to innovate can put companies at a competitive disadvantage as customers increasingly expect personalised, seamless, and digitally-driven experiences. Ultimately, falling behind in technological adoption can limit growth potential and hinder long-term success in a rapidly evolving market.

Solution: strategies for financial institutions

To mitigate these hidden costs, financial services organisations must adopt a multi-pronged approach. This includes partnering with Managed Service Providers (MSPs) who offer specialist expertise in areas like security, infrastructure management, and helpdesk support.

MSPs can also help upskill existing staff, enabling financial institutions to build internal expertise and manage increasingly complex IT systems. With 52% of companies settling for less-qualified hires due to talent scarcity, MSP-led training offers a practical solution for developing existing employees.

Furthermore, attracting and retaining talent is crucial. While large enterprises will be using salary to entice talent, smaller financial institutions can win at the junior level by emphasising professional development, growth opportunities, and a positive company culture. Offering stability and opportunities for meaningful work can be particularly appealing to younger generations. To manage budget constraints, smaller and medium-sized financial organisations can consider outsourcing specialised functions and strategically building internal expertise as they grow.

Finally, promoting diversity and inclusion widens the talent pool, bringing fresh perspectives and skills to drive innovation. A McKinsey & Company report highlights a significant diversity gap in the leadership of the financial services sector. The report reveals that women hold a mere 12% of senior positions, while Black and minority ethnic (BME) individuals occupy only 6% of these roles. These figures underscore the need for greater diversity and inclusion within the industry. The financial services sector must catch up, particularly in technology roles, and create an inclusive culture that can attract underrepresented groups and help address the talent shortage.

By addressing the IT skills gap proactively, financial services companies can avoid the hidden costs and position themselves for future success in an increasingly technology-driven world.

Charlotte Webb, Operations Director at Hyve Managed Hosting