FCA urged to push diversity pay gap reporting

The UK’s financial regulator has been urged to provide guidance for firms in the financial district of London (known as ‘the City’) on reporting ethnicity pay gap data, as concerns mount that diversity initiatives once championed by company executives have taken a back seat.

The Financial Conduct Authority and Prudential Regulation Authority published its diversity and inclusion in financial services consultation in September 2023. This included proposals such as disclosing employees’ age, or gender, ethnicity and religion. More than a year on and the founder of ethnic diversity campaign group Reboot has written to FCA boss Nikhil Rathi calling for urgent action.

“This consultation marked an important step towards embedding diversity as a core regulatory priority,” Noreen Biddle Shah said in the letter. The letter is also signed by Diversity Project chair Baroness Helena Morrisey. Biddle Shah said in the year following the FCA’s consultation there had been “growing industry resistance to diversity, equality and inclusion initiatives”.

The absence of timely regulatory action risks undermining the progress made thus far,” said Biddle Shah. “Employees and industry leaders alike look to the FCA and PRA for clear guidance and accountability frameworks.” Reboot is calling on the FCA to provide guidance on ethnicity pay gap reporting — a mandatory measure referenced in July’s King’s speech for companies with more than 250 employees. Currently just 4 per cent of financial services firms disclose this information voluntarily.

“We want to see progress to further diversity and inclusion in the financial services sector and believe that regulators can play a part in accelerating this change,” said an FCA spokesperson. “We also appreciate the important part of voluntary initiatives. We think these roles can be complementary and that we will be most effective in driving change where we work together.”

The call to action comes amid growing concerns from financial services professionals that diversity drives have stalled. More than two thirds of the 800 respondents to a recent Reboot survey said their employers’ ethnic and racial diversity efforts had not changed or had worsened over the past two years.

“We are definitely not where we need to be,” said former KPMG UK interim chief executive Mary O’Connor. “As a former CEO and board member, part of the problem is seeing DE&I (Diversity, Ethnicity & Inclusion) as some kind of project. This clearly hasn’t worked.” Nishma Gosrani, a partner in the financial services practice at Bain & Company, said voluntary measures designed to improve DE&I across firms have “not been sufficient to drive substantial progress.

“Mandatory reporting of ethnicity pay gaps could be a game changer,” said Gosrani. “This would help catalyse progress by illuminating disparities and inequalities within firms, enabling targeted and data-driven interventions.” Among the states in the European Union, Ireland has been one of the leading in matters of equality and diversity. According to a new study, the gender pension gap being experienced by Irish women could be eliminated by 2049.

Currently, Irish women have 31pc less than men in their pension pots when they retire. This is for a variety of reasons, including being paid less and because motherhood usually leaves them with less recorded service during their careers. Women are also typically less likely to make additional contributions to their pension plans, both because they have less spare money than men and have other financial priorities.

The study by The Future Laboratory, which was commissioned by AIR, concludes that, due to policy changes and social shifts, the already closing gender pension gap could be gone by 2049. The gap has fallen from 38 pc in 2018 to 31 pc today. This could accelerate due to the introduction of pension auto-enrolment this year, the impact of compulsory reporting on the gender pay gap by companies, as well as economic and demographic shifts, the study finds.