City recruitment looking up - City Comment
21 November 2013
City recruitment has undoubtedly been a tough market over the last few years.
Thu, 21 Nov 2013 | By Adrian Kearsey, equity analyst at Hardman & Co
City recruitment has undoubtedly been a tough market over the last few years.
Continued deleveraging of balance sheets (largely driven by regulation) will mean that financial institutions continue to retrench into core areas, making them leaner and more focused.
Also, the application of technology enables IT investment to replace many lower skilled functions within the industry. As a consequence, we are likely to see further downsizing of banks. For example, earlier this month Barclays announced that it was cutting a further 1,700 jobs in the UK (more than 5% of its total workforce).
The current round of redundancies will mainly affect people in the retail branches, but largely reflects the automation of many functions. By the end of this year, Britain's four biggest banks will have axed 189,000 jobs around the world in the five years since the financial crisis broke.
So how is this currently affecting the London financial services staffing market?
Announcements from the quoted staffers has been mixed. On 14 October Michael Page announced it was seeing good performances from their finance and legal desks. By contrast, on 10 October, Hays said that it’s banking and City-related specialisms “remain subdued”.
Elsewhere, the 13 October the Morgan McKinley London Employment Monitor registered a marginal 1.7% decrease in job vacations (7,245 vacancies in October vs 7,371 vacancies in September). However, the overall trend is modestly upward. Moreover, salaries are trending higher (up 12% in October).
That said, we anticipate City recruitment to improve next year. Quantitative easing in Japan and both sides of the Atlantic is helping fuel the resurgence in the initial public offerings (IPO) market. So far this year there have been 75 IPOs on the London markets, up from 67 for the whole of 2012. Moreover, the levels of money being raised (via equity issuance) are increasing. Monies raised via IPOs have totalled £9.7bn so far this year. This compares with £8bn for the whole of 2012.
According to Dealogic, M&A activity is also growing. Global deal flow reached $2.1 trillion (£1.3 trillion) in the first nine months of 2013. This is an increase of 17% compared with the same period in 2012. US-targeted activity has been particularly strong, with the value of transactions up 39%. Unsurprisingly, within Europe the UK is delivering the strongest deal flow. Given the availability of relative cheap credit, this growing level of activity is expected to continue.
Looking ahead into 2014
All this bodes well for central London recruitment into financial services and we expect hiring will strengthen in the New Year. As a consequence, certain front office positions (especially in terms of corporate finance and syndication) should see greater demand. Also we expect higher demand for finance IT and compliance investment. Indeed given the continued introduction of new regulatory requirements (notable Basel III) there may well be a mini bubble in certain segments of the markets (notably risk).
These trends should help the larger quoted staffing names such as Hays, Michael Page and SThree. But it should also give a boost for some of the smaller staffers such as Harvey Nash and Empresaria. Though we suspect it will be late in the first quarter (ie. March) before they are in a position to deliver news flow to substantiate these anticipated trends.
City recruitment has undoubtedly been a tough market over the last few years.
Continued deleveraging of balance sheets (largely driven by regulation) will mean that financial institutions continue to retrench into core areas, making them leaner and more focused.
Also, the application of technology enables IT investment to replace many lower skilled functions within the industry. As a consequence, we are likely to see further downsizing of banks. For example, earlier this month Barclays announced that it was cutting a further 1,700 jobs in the UK (more than 5% of its total workforce).
The current round of redundancies will mainly affect people in the retail branches, but largely reflects the automation of many functions. By the end of this year, Britain's four biggest banks will have axed 189,000 jobs around the world in the five years since the financial crisis broke.
So how is this currently affecting the London financial services staffing market?
Announcements from the quoted staffers has been mixed. On 14 October Michael Page announced it was seeing good performances from their finance and legal desks. By contrast, on 10 October, Hays said that it’s banking and City-related specialisms “remain subdued”.
Elsewhere, the 13 October the Morgan McKinley London Employment Monitor registered a marginal 1.7% decrease in job vacations (7,245 vacancies in October vs 7,371 vacancies in September). However, the overall trend is modestly upward. Moreover, salaries are trending higher (up 12% in October).
That said, we anticipate City recruitment to improve next year. Quantitative easing in Japan and both sides of the Atlantic is helping fuel the resurgence in the initial public offerings (IPO) market. So far this year there have been 75 IPOs on the London markets, up from 67 for the whole of 2012. Moreover, the levels of money being raised (via equity issuance) are increasing. Monies raised via IPOs have totalled £9.7bn so far this year. This compares with £8bn for the whole of 2012.
According to Dealogic, M&A activity is also growing. Global deal flow reached $2.1 trillion (£1.3 trillion) in the first nine months of 2013. This is an increase of 17% compared with the same period in 2012. US-targeted activity has been particularly strong, with the value of transactions up 39%. Unsurprisingly, within Europe the UK is delivering the strongest deal flow. Given the availability of relative cheap credit, this growing level of activity is expected to continue.
Looking ahead into 2014
All this bodes well for central London recruitment into financial services and we expect hiring will strengthen in the New Year. As a consequence, certain front office positions (especially in terms of corporate finance and syndication) should see greater demand. Also we expect higher demand for finance IT and compliance investment. Indeed given the continued introduction of new regulatory requirements (notable Basel III) there may well be a mini bubble in certain segments of the markets (notably risk).
These trends should help the larger quoted staffing names such as Hays, Michael Page and SThree. But it should also give a boost for some of the smaller staffers such as Harvey Nash and Empresaria. Though we suspect it will be late in the first quarter (ie. March) before they are in a position to deliver news flow to substantiate these anticipated trends.
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