Christopher Walker: School financiers to be a class act

One of the most unpleasant evenings of my life was facing a room full of commodity traders shortly after the '87 crash. I managed their pension fund, and despite having outperformed the market and most rivals by close to 12 per cent, they were baying for blood.

This customer reaction to bear markets is probably being repeated all over the world at this moment, but in the traders' case it was different. In the Eighties, we believed in burn-out; retirement was only a few deals away and nobody in that room was over 32.

That's the age of my latest graduate trainee. The City has not changed that much in recent years; the important point is he's German. If you do business in Germany, you probably know that just about "anyone who's anyone" has a PhD. The commitment to education is enshrined in the national self-image.

So it is with some confusion that Germans read a recent OECD report. This found they have only 1,040 graduates in engineering and science per 100,000 employees, against an OECD average of 1,500. Worse, only one in six school-leavers complete a university degree, which puts Germany on a par with Turkey and Mexico.

It would be tempting to believe that the contrast between these figures and the well-educated élite running industry and banking shows German egalitarianism is a myth. But the truth is more complex. To some extent, the gap is one of generation, not class. It represents the result of nearly two decades of under-funding of education, and an over-concentration on the apprentice schemes more appropriate to manufacturing than service industries.

But it also stems from a seeming reluctance among students to get on with their careers. It is not unusual to find people in their forties studying for first degrees, while the ease with which students begin postgraduate studies contrasts sharply with tight-fisted Britain. At the same time, a German report in January found that 70 per cent of firms were unable to fill vacancies because of a lack of qualified applicants.

The question is whether the German system has grown too far away from the real world of business, and whether this trend is common across Europe. This was the topic of conversation in Stockholm last week, where I braved the snow to talk politics. The conclusion was that governments are making spending decisions which have significant business effects; "good" if the money's for education, "bad" if it's for increased benefits. In Sweden this debate has real meaning after decades of heavy social spending which has done little to improve the nation's competitiveness.

This message appears to have found favour here. Last week, Education Secretary Estelle Morris spoke of targeting a renaissance in vocational training, and revealed plans for new skills-based GCSEs, leading to vocational A-levels, then degrees. She also proposed making all pupils spend time working in real businesses. This is the start of a national debate on education, and the business community must play its part.

I've had bad experiences with the "vocationally trained" in fund management. One graduate, claiming a degree in accounting, lacked basic numerical competence. Maybe this is because finance has not established the close links with universities that exist in science. Consider Britain's success in spawning technology and biotechnology companies from what started as research projects.

In the US, there is a similar link with finance, hence the finance boutiques that come out of Harvard or Princeton. This has allowed the US to dominate conceptual thinking in my field. Maybe it's time to challenge that.