Last year was politically and economically a bit of a quagmire for the UK; the political hole it dug for itself seemed to deepen with a weakened Conservative Party and an EU that was reluctant to lay out its intentions.
However, economic indicators throughout the year have consistently not been as bad as expected. People, pundits and academics, including David Cameron, have come to a realisation that the 7th largest economy in the world isn’t simply going to float into the middle of the Atlantic and suffer a slow economic burnout, taking it back to the stone-age. Apparently we will survive, with or without the EU.
Having said that, the political unrest, uncertainty and overall lack of cohesion definitely had an impact on hiring and the year was defined by several key factors; MiFID II, Brexit & Ring Fencing and a shift towards full time employees.
MiFID II has been the only thing worth really talking about in 2017 in financial services, on both the buy and sell side. I could go into more detail about what it aims to do and what the pitfalls have been with implementing it, but the truth is everyone on the Morgan McKinley change desk, alongside the vast majority of people in banking and asset management, has spent the last 2 years talking about little else.
Implementation was due at the beginning of January 2018 and the banks in London have spent the last 6 months scrambling to get as much done as possible. There are further implementation dates for certain workstreams running until September and auditing of banks’ compliance will only start in about 6 months time, so we’ve definitely not heard the last of it (even when it is finally wrapped up, they’re already talking about MiFID III so watch this space!).
Although the programmes of work are still running, hiring in the area has all but dried up. We haven’t seen any MiFID roles come through so far this year and no one is telling us about regulatory ramp ups. There have been other regulatory demands.
GDPR caused a stir late in the year but many banks seem to have managed it with internal resources or consultancies and it also seems that this regulation has been overshadowed by MiFID II. There are a number of inconsistencies between the two and banks are following MiFID II much more rigidly than GDPR. The reasoning for this is up for speculation, but it probably comes down to them fearing the banking regulators more than the EU. In terms of hiring, the regulation is more around policy and procedures change and doesn’t require a huge amount of technical delivery, so the IT team has been relatively light on roles in the area.
Of course banks still have until Jan 2019 to actually get the work done so we will no doubt see some hiring in this space this year. Exactly how much is hard to say, as a lot of the larger organisations already have massive programmes up and running; there will naturally be attrition and specific skill set shortages, so we could see contract recruitment in the space.
Ring-fencing has been a massive enterprise for all organisations and has required resources across all functions. The major players in the market seemed to have a tougher time of it due to their extraordinarily complicated architectures. It ultimately means building a second bank within the existing organisation, and one of the main draws for the programme a year ago was the question “how often do you get to build a bank”? The great irony of course is that the answer to that question is “every couple of years” nowadays. With the separation of TSB, the divestment of Williams and Glynn, ring-fencing and now Brexit, you can’t move for the large structural reform programmes.
The response to Brexit now seems clear and everyone must plan for a “Hard Brexit” meaning that without a European entity, you can’t trade with Europe. So the affected places will now set about creating European entities and the amount of operations that needs to shift over is still very much in limbo but it doesn’t look like it’s going to be quite as bad as we first thought.
One major UK bank initiated an enormous project around July last year, hiring 60 contractors in a month because they needed to work out what their response should be. Since the turn of the New Year, their budgets have been slashed as they’ve realised that the book of work simply isn’t as bad as they initially reckoned. They also realised that Ring-fencing is doing essentially the same thing, so have begun the process of poaching internal resources from there. Exactly what hiring comes from Brexit over the coming months is hard to say, and is heavily dependent on the political negotiations. No one really wants to make a decision until they know what’s happening externally.
The final underpinning theme across 2017 was the shift towards permanent resources. This has happened for a number of reasons and the most obvious is that of cost. Contractors and consultancies are far from cheap and since change in the new BAU, there’s always a need (especially in large organisations) for large numbers of project professionals.
Why have a massive bench of expensive contractors who could leave at any time when you could have a centralised team of permanent resources who are cheaper and can be held to greater accountability for delivering positive and beneficial change? With this has come the creation of internal consultancies - something that looks to be a big focus for many of our larger clients this year.
We’re all feeling quite positive about 2018. Banks aren’t under the yolk of MiFID II anymore and so budgets should be released to other more interesting areas. Brexit, Ring-fencing and hopefully FRTB will keep banks busy with some level of mandatory hiring. Most likely they will be looking for front to back product knowledge, a sound understanding of data flows and strong delivery mindsets. Brexit and ring-fencing will lead to large structural pieces of work and FRTB will be more aligned to extracting data from source systems and pushing it out through risk and finance architecture. The extent of hiring in these areas however remains a mystery, as no one really knows their budgets or books of work for 2018.
One area that we do see growing is in the disruptive technology space. The hype around crypto-currencies in 2017 fuelled the fires, underpinning what some want to turn into a techno banking revolution. The market is awash with theories that the new currencies, distributed ledgers and big data based technologies will one day bring down the banking giants that dominate the industry today.
I think this is probably a pipe dream and years away from actually being realised if it ever happens. However, with the advent of these peer-to-peer technologies and the implementation of open banking (a data sharing platform brought in to increase competition in the banking world), it definitely does feel as though the tide is turning. The benefit of this in the IT project sphere is that while the external market is looking at using these technologies to disrupt and break the system, the big banks are using exactly the same technologies to strengthen their hold on the market.
As technologists then, you have a choice. You can either go down the FinTech path, in which case you need to make sure you back the right horse...or you can go into one of the many “innovation labs” popping up across the world. We’ve already had some of our smaller clients ask for help in scoping out the innovation market as they look to grow their R&D departments significantly over the coming years. Either choice would be exceptionally interesting and put you firmly at the centre of an incredibly important time for banking and technology.
If you’re interested in a career change or could use the Projects desk’s help, then please reach out to us on +44 20 7092 0210.