British financial services companies are likely to move away from the distribution end of the business to concentrate on manufacturing products. They’ll form strategic alliances to handle the distribution, says a report by the International Institute of Banking & Financial Services.

It says manufacturers in the future are likely to reduce the diversification of their products and processes, while distributors will try to increase the range of products that they offer their customers. “The result of this will be that firms will be less likely to attempt to influence the whole value chain from manufacturer to distribution by owning it, and more likely to do this by other means.”

The report says one approach will be the continued increase in long-term strategic alliances between players. However, there are some key barriers that will need to be overcome for this to succeed. The report’s co-author, Kevin Littler, says that up to now there has been “a cultural lack of transparency and co-operation between firms”.

“This has in turn led to a lack of systems integration between manufacturers and distributors,” he says. “Traditionally, for the new model to succeed, there will need to be a significant upgrade in the level of partnership management skills, which have not been required to the same extent in the past.”