Toronto's importance as Canada's financial centre is growing, according to a report that highlights the sector's positive effect on employment – a finding that could also make it susceptible to rising competition from financial technology upstarts.
A report from the Conference Board of Canada said the city's share of jobs in Canada's financial services sector rose to 32.3 per cent in 2014, up more than four percentage points since 2004 – a gain that becomes even more pronounced given that Toronto's share of total Canadian employment grew only half a percentage point over the same period.
"This indicates that Toronto has solidified its position as Canada's leading financial centre," the report said.
The benefits of this position cannot be understated.
Jobs within the financial sector account for 11.4 per cent of total employment in Toronto and 8.1 per cent within the Toronto region, and the jobs tend to be well paid.
The high level of remuneration per employee has magnified the sector's economic contribution: Financial services accounted for 13.3 per cent of the Toronto region's gross domestic product in 2014, making it the second largest contributor to the city's economic activity next to public services.
"Ultimately, the high level of GDP per employee in the financial services sector reflects the fact that, in general, it generates a high degree of value-added for the economy," the report said.
Toronto gains indirect benefits as well from its status as a financial centre. The city's financial sector supported more than 200,000 additional jobs, in areas such as consulting, accounting and legal services. While the jobs extended across the country, most of them are in the city.
The sector also provides indirect economic impact, largely to Toronto. The report estimated that for every $100 of GDP generated in Toronto directly by banks and insurers, the indirect economic impact was $23 in Toronto, $21 in the rest of Ontario and $9 in the rest of Canada.
While upbeat, the report lands at what could be a pivotal time for financial services.
In particular, the big banks – five of the Big Six have their headquarters in Toronto – are adjusting to slowing revenue expansion as once-double-digit growth in loans and mortgages falls.
At the same time, the banks are redirecting resources from traditional banking, such as branches, and beefing up their online and mobile capabilities as consumers change the way they conduct day-to-day financial activities.
As part of this redirection, the banks have cut jobs and taken large restructuring charges over the past year, estimated to top $1-billion in 2015.
A recent report from University of Toronto's Munk School of Global Affairs, with support from the Toronto Financial Services Alliance, said Toronto could lose out on a tremendous surge in global financial technology if existing players fail to strike meaningful partnerships with fintech startups.
"We can easily be on par with London and New York," Dan Breznitz, the co-director of the innovation policy lab at the Munk School of Global Affairs and one of the authors of the report, said earlier this month.