What 2011 meant for financial services recruitment

Transcription

1 What 2011 meant for financial services recruitment

2 What 2011 meant for financial services recruitment After three years of tough times in the economy, last January the talk in recruitment circles was of cautious optimism for the year ahead. However, such nascent hope has been very nearly crushed in Crisis in the Eurozone, extensive job cuts at home, and patchy activity in the Square Mile have caused many people to end the year in a far more gloomy mood. But, what were the elements that had a major impact on the past year s recruitment market? Where has the axe fallen and why? And is there any room for hope ahead? The Eurozone the shockwave of 2011 What was not foreseen at the start of the year was the scale and far-reaching impact of the debt crisis in the Eurozone, which would see global markets severely spooked in the latter part of the year. Failure to get a handle on public debt levels in Greece, Spain, Portugal, Ireland and Italy snowballed to a point where there was talk of these straitened countries defaulting on their borrowing, fuelling predictions of a possible break-up of the single currency area. Sir Mervyn King, Governor of the Bank of England, estimated that the European sovereign debt crisis had cost the UK up to 15 billion in lost economic activity, making banks less safe in the last quarter of King added: The pressure on bank balance sheets is coming not from what regulators are doing, but from the realisation in the markets of just how risky bank balance sheets are. Andrew Evans, chief operations officer of Morgan McKinley Financial Services, pointed out that sentiment is all when it comes to hiring, but optimism has been hard to come by and often shortlived in the latter part of He commented: Financial services recruitment activity can change rapidly in response to shifts in market conditions and sentiment amongst employers and candidates. An illustration of this is the spike in hiring activity following the European bailout announcement which had a significant, but short term, positive effect on the hiring market. However, the fact remained that the big institutions were under severe financial pressure in 2011 and had to reduce their costs. Mark Cameron, recruiter Astbury Marsden s chief operating officer, said: With the end of the Eurozone crisis being postponed, employers seem to be ending 2011

3 still in cost-cutting mode. During periods when the bigger banks are cutting jobs most employees sit tight and wait for the storm to pass, but an increasing number of bankers are wondering whether it is worth the risk of jumping ship. They will be conscious of the fact that there aren t a huge number of jobs for them to switch into. Redundancies and reduced headcount One of the harshest realities of 2011 has been a swathe of job losses in financial services and the cull just appeared to be gaining pace towards the end of the year. The Confederation of British Industry (CBI) and accountant PricewaterhouseCoopers estimated that about 8,000 further jobs would be lost in UK financial services in the last three months of 2011, which, if accurate, means that there are about 90,000 fewer positions in the industry at the close of the year than in Banks including Goldman Sachs, HSBC and Royal Bank of Scotland announced thousands of job cuts in the latter part of BNP Paribas revealed in November that it would lose about 1,400 people from its investment banking division, while Bank of America Merrill Lynch was rumoured to be preparing to cut its headcount by up to 15 per cent. Japanese giant Nomura was also believed to be gearing up to slice about 100 posts. Elsewhere, brokers such as Finn Cap, Matrix Capital and Arden Partners started letting employees go. Matrix expected to halve its 100-strong staff, Arden axed about ten per cent of workers, and Evolution Securities shed 60 jobs ahead of Investec s takeover of the business. Stock broker Altium revealed it was closing its broking business, representing 30 jobs, due to a lack of equity market activity and instead would concentrate on advisory work. A further 45 posts hung in the balance as a result of Westhouse buying out Arbuthnot Banking s investment banking arm. Meanwhile, hedge fund giant Man Group admitted that it will cut about 400 jobs by early David Sayer, global head of retail banking for accountant KPMG, commented: It s extremely unlikely that the markets are going to get what they are seeking and, therefore, the crisis looks set to rumble on. Over 150,000 redundancies have been announced, principally in investment

4 banks. Optimism has disappeared. Current trading is poor. Every bank is having to respond to the weak environment and real trading issues and one obvious way to do that is to reduce staff. Vickers report and the impact of regulation on recruitment and pay Critics in the City have been quick to blame the weight of regulation for much of the financial world s recent ills. Proposed EU regulation including the financial transaction tax, Solvency II, the capital requirements directive, audit market reforms and proposals from Brussels on corporate governance have all been slated as threatening UK business growth and hampering the finance industry s entrepreneurial spirit. But the regulations that caused particular discussion in the Square Mile this year were those affecting pay. Rules designed to rein in bonus payments and curb excessive risk taking had the knock-on effect of a boost to base pay for a good proportion of valued City workers earlier in the year. The irony was that these very arrangements forced the hands of many banks and brokers later in 2011 when revenue began to dry up. With less money available to meet fixed financial commitments, redundancies all too often seemed the only solution. Astbury Marsden Cameron explained: The consequences of the regulatory move against City bonuses has been that banks have been left with higher fixed salary costs at a time when banking revenues have slumped. With less flexibility to pare back bonuses, we are, instead, seeing aggressive redundancy programmes from the banks as a way of reducing costs in response to falling income. Meanwhile, recommendations for the UK banking sector made by Sir John Vickers in the Independent Commission on Banking report published in September proposed ringfencing financial institutions wholesale and investment banking arms from their retail operations. The massive regulatory reform that this would involve provoked some commentators to predict a boost to hiring in some areas, particularly around systems and IT. Others saw the potential to create entirely new roles as an interface between banks different functional areas. Laurie Boyall, managing director at financial services recruiter McGregor Boyall, said: It will inevitably lead to a renewed spike in demand for IT specialists particularly contractors to work

5 on large-scale projects, which will be driven by compliance and risk issues rather than investment in new systems. However, the massive lead time on the recommendations the report suggested that banks aim to implement changes by 2019 mean that any impact is not likely to be felt for many years to come. Areas of optimism In this environment of anxiety and uncertainty, risk, regulation and compliance remained amongst the few hotspots in hiring terms. KPMG s Sayer observed: Risk and regulatory compliance has been one area of growth given the increased levels of regulation that we ve witnessed in recent times. There s a real and ongoing demand for this type of expertise and few enough people qualified to meet that demand. Those in existing risk jobs and related areas may well get bonuses this year. Even M&A has been doing well in some houses. According to Steven Kirkpatrick, managing director of recruiter Adecco, the IT sector is currently performing well. He commented: While volumes of permanent roles remain in decline, this is marginal, and temporary roles are showing tentative growth. This bucks the trend for temporary jobs, which are still showing decline in all other sectors. The banking, insurance and finance sector is making progress. Although advertised job volumes are still decreasing, this decline has slowed considerably since last month, suggesting that the market may have cut back sufficiently to ward off further reductions. Phil Sheridan, Robert Half International s UK managing director, agrees. He added: Business services, natural resources and some areas of financial services are industries where demand still outweighs supply for top talent, particularly in finance, accounting and IT. But others suggest that those working in IT in City firms are often the first to suffer when hiring decisions are made. IT contractors operating in financial services have experienced a turbulent year by many accounts, with demand running high in the late summer, only for opportunities and rates to be cut back severely later in the year.

6 Daniel Mayo, financial services practice leader for analyst Ovum, said: What we have seen is that, within the financial markets, the income of these companies has been quite volatile. The practical consequence of this has been that the banks have been trying to make the cost base more flexible. And, of course, with contractors, they offer a quite effective way of achieving this. But, as ever, across all sectors, top talent will always be in demand. Oriel Securities raised its headcount by at least 30 last year, poaching star hires from rivals MF Global and Matrix. Howard Shore, executive chairman of Shore Capital, also sees the chance to win over rival talent in such uncertain times. He said: Strategically, we ve always used periods of dislocation, market turbulence, volatility and distress as an opportunity to hire good people. KPMG s Sayer concluded: The senior revenue generators are still in demand. There are some people who will have made a lot of money for their firms in this market and their employers will be keen to hold onto them. But their rivals will also be prepared to win them over. There are a lot of companies still actively pursuing talent, but at the top end of the scale.