The data shows us how the financial crisis didn’t just deliver a single blow to hiring activity in 2009, but has also continued to affect both numbers of jobs and those professionals seeking to move during the subsequent period.
“What we dont necessarily see, however, are the seismic shifts in priorities and skills required by employers,” said Hakan Enver, operations director, financial services for Morgan McKinley Regulation. “Globalisation and diversity are now changing the shape of the talent being sought and hired.”
During the period 2008 and 2009, there was a sudden wave of job losses and hiring freezes that brought an end to a decade of continual annual growth in London’s financial services and business services sector, reported to be six per cent per annum. It is evident that from as early as 2007, the number of job opportunities available was decreasing. The catalyst for the numbers to fall even further was back in August 2007, when BNP Paribas terminated withdrawals from three hedge funds citing “a complete evaporation of liquidity”. A bubble had formed in the market and with many banks heavily invested in US mortgages, suddenly found themselves at huge risk of loss. Within weeks, there were the well reported queues outside Northern Rock branches, the first run on a leading UK bank for over 200 years.
Enver explained that in April 2009, the G20 summit committed $5bn of combined stimulus to the global economy. Much of this, along with the various monetary policies within each G20 nation, was the main reason for the global recession to bottom out in 2009. This partly explains why the data shows a rise in job opportunities during that year. While 2010 had a slight return in confidence, this was short lived, with the job availability declining, and continuing to do so for the following three years. On the flip side, the number of professionals actively seeking employment from 2009 to 2011 rose. A proportion of this is explained by the number of redundancies made in the market during that time. In 2013, the CBI employers group stated that around 132,000 jobs had been lost in finance and insurance since the downturn began. Six or seven years post-crisis, there continues to be reports of job losses in the City.
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“From the moment JP Morgan acquired Bear Stearns for $10 a share in March 2008, through to Lehmans eventual collapse six months later, the worlds economies would not function the same way again,” said Enver. “The shifts in the shape of many of our client organisations have continued to impact on the hiring environment, as skills, such as risk and compliance become ascendant, while elsewhere whole teams have been removed.”
In 2008/9, the Treasury injected 37bn of new capital into the Royal Bank of Scotland Group PLC, Lloyds TSB and HBOS PLC, to avert financial sector collapse. Compliance hiring fluctuated until 2010, when the first wave of new regulations such as Dodd Frank saw hiring steadily increase once again. Further new regulations such as MiFID 2, EMIR, AIFMD and RDR and large anti money laundering sanctions and fines dealt by the regulator and US Treasurys OCC saw firms compliance teams grow to unprecedented levels by 2013 and 2014.
Paul Murphy, director of recruitment, EMEA, at Royal Bank of Canada, said: “There was an overall shrinking and retrenchment in certain market areas sub-prime, complex derivatives that happened almost immediately post-Lehman. People who were kept on were simply winding those businesses down. As regulation followed, those able to combine product knowledge with compliance skills were highly and remain highly sought after.”
Some jobs simply moved home.
“We can see how over this period, there was a migration of roles especially middle and back office roles from west to east. Now, we see those roles moving back from Singapore and Hong Kong to the UK and US as economic recovery gains momentum,” suggested Richie Holliday, chief operations officer, Morgan McKinley, Asia Pacific.
The increasing specialisation that followed the financial crisis, in which banking behemoths sought to become more focused in their activities, has still provided some new opportunities,
Murphy, for example, says that Royal Bank of Canada is now, “moving into sectors that have been de-emphasised by other banks, where our product capability, credit rating and broad client base gives us competitive advantage.”
The changing balance of global economic power has also shifted in this time-frame from west to east, and this has affected client-facing specialisms. “We have seen private wealth management move from its traditional homes in London, Switzerland and New York to China where new wealth is seeking a more sophisticated financial platform,” reported Andrew Evans, chief operations officer, at Morgan McKinley, South Asia.
Additionally, not all roles are suited to US and European natives keen to take an international assignment. “In China to be successful in private client work, you must be native, a fluent Mandarin speaker, so there is a limited talent pool,” said Evans.
Gordon Gecko’s infamous assertion that “Greed is Good” has been widely blamed for fuelling the financial crisis and putting the brakes on bonuses has been a regulatory priority, particularly in Europe. In October, 2008 Gordon Brown declared, “The day of big bonuses is over,” but was he right
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In 2013 the EU passed legislation that would cap bonuses at 100 per cent of salary. The UK has vehemently opposed moves to cap pay, arguing that it will lead to a talent drain and reduce the City’s competitiveness in the global talent battle as rival jurisdictions (New York and Singapore, for example) can pay star performers what they like. Many believe fixed pay will also increase compensation considerably.
“According to figures from HM Revenues and Customs, the finance sector (across the UK) paid out 67.6bn in bonuses between 2008/9 and 2012/13. London is still considered the main financial hub of the world. People want to move to London from all over the world, and we see many international professionals with excellent CVs looking to relocate,” said Enver. The impact of bonus capping so far has not been as dramatic as had originally been expected.
Despite this, bonuses continue to exercise the media and the public. “Remuneration and salary inflation,” said Enver, “reflects the market of supply and demand. We see professionals who can combine product knowledge with strong regulatory expertise commanding ever-higher remuneration packages. The number of executives who take home six figure bonuses is still relatively small and tends to falsify the overall picture of compensation in the banking sector.”
Read more on the next page to find out about how women are fairing and the role of regulation.