“An exodus would require individual businesses to potentially relocate thousands of employees, which simply isn’t logistically or financially feasible. Up to a million Londoners work in the financial sector. Only a small portion of them have the flexibility to up and move to a new country, and no other region can compete with the quantity and calibre of financial professionals”.
The fallout from Brexit is reflected across the board in July’s employment data. Month-on-month available jobs dropped by 12%, a modest decline given the gravity of the referendum. “Hiring slowed as institutions found themselves in a post-Brexit limbo, but the impact of the referendum was not as aggressive as we expected”, said Hakan Enver, Operations Director, Morgan McKinley Financial Services.
The year-on-year decline of 27% in jobs available is more drastic, though consistent with the overall flat employment climate of the first half (H1). Save for upticks in April and June, H1 2016 has been characterised by an ebbing of both jobs and professionals seeking opportunities.
“Jumping ship in a climate of uncertainty is particularly risky for employees”, said Enver in reference to the 14% decline in job seekers month-on-month. “But we’re also seeing the usual seasonal factors playing out as people take their summer holidays causing a lull in the marketplace. We would expect a bump in the September figures”.
Adding to the climate of uncertainty in hiring is a predicted dip in Mergers and Acquisitions activity as a result of Brexit. “M&A is an excellent barometer of confidence in markets and hiring trends in supporting areas”, said Enver. “When deals are placed on hold, in many instances, so is hiring”.
The relatively mild employment backlash can be attributed, in part, to decisive political leadership, and a growing sense that Article 50 will either not be triggered, or that its consequences will be moderate or slow to materialise. “The prompt formation of a new government was encouraging”, said Enver. “And London Mayor Sadiq Khan has emerged as a vocal champion of the City”.
Calling Labour Party Leader Jeremy Corbyn’s proposal to levy the City with a financial transaction tax “madness”, Khan has sought to transform his party’s relationship with the City and broader business community. “I am pro-business”, said Khan in a recent interview. “You have to be an advocate for wealth creators in London”. Khan continues his push to have London represented in EU exit negotiations, and is seeking a devolution of power to London in key areas, including taxation, business and skills.
Philip Hammond, the new British finance minister, has voiced his faith in the short-term resilience of the financial industry, while underscoring the importance of maintaining its access to the single market. But with negotiations with the EU still not underway, it remains to be seen what, if any, provisions will be carved out to safeguard the financial sector.
“People are currently in one of two camps: those with a negative outlook who fear a recession, and those with a positive one, who expect Britain to weather the Brexit storm”, continued Enver. “We will have more clarity in the months ahead as to which camp is right, but in the meantime it’s business as usual”.
From accounts of finance sector leaders being poised to relocate their London operations to other EU countries, to reports that the City of London will remain the leading financial centre of the world, a consistent post-Brexit narrative is elusive.
“An exodus would require individual businesses to potentially relocate thousands of employees, which simply isn’t logistically or financially feasible”, said Enver. “Up to a million Londoners work in the financial sector. Only a small portion of them have the flexibility to up and move to a new country, and no other region can compete with the quantity and calibre of financial professionals”.
“Steady but not spectacular” is the tagline for compliance hiring in H1 2016. Demand for qualified professionals has been high, but supply has been low due to a shortage of qualified candidates willing to move, as well as a failure to get approval for opening up jobs. The two factors combined have resulted in employment numbers being lower than anticipated.
Underlying the compliance employment data is also a divide in public versus private -side advisory team hiring. Banks are currently recruiting primarily in the public-side for advisory, while hiring on private-side advisory languishes.
Though it remains unclear how the different sub-sectors will be impacted by British voters’ decision to exit the EU, increased demand for in-house lawyers and regulatory professionals is expected to rise as banks need help navigating a shifting and murky regulatory landscape.
Leo Bellometti, Compliance Consultant, Morgan McKinley commented “Despite the economic and political landscape, we have seen an increase of hiring in specific areas within compliance: front office advisory, compliance monitoring and guideline/investment monitoring. Each of these roles require different skill sets; the front office advisory team will need to communicate efficiently and provide instant regulatory advice to the business, portfolio managers and senior stakeholders on real time issues. Candidates with extensive experience of conducting thematic reviews are needed for compliance monitoring roles. Coding for Guideline/Investment Monitoring roles is a necessity - those with this experience are deemed even more desirable, therefore obtaining higher salaries".
One area of great interest has been the debate around salary increases; the average salary uplift for candidates moving within compliance advisory is 15% - 20%. However, some are looking for increases of 30% or more to move and, unlike previously, firms will no longer sanction this and are pushing back causing potential moves to collapse with salary a sticking point.
Bellometti continues “As we progress through H2, we expect the market to continue to be busy and that many of our clients will indeed be on the lookout for certain skills. Although the EU referendum result was not quite what the majority of the financial services sector was expecting, the initial news from our clients is that it’s business as usual for the immediate future, meaning that recruitment within Asset Management Compliance will continue to happen throughout the second half of the year”.
On the 4th August, The Bank of England lowered its interest rates to 0.25 percent, an all time historic low. “While hopefully a boon for investment, as long as financial institutions grapple with the ongoing profit degradation from interest rate cuts, they are unlikely to invest in significant employment growth”, said Enver.
Though British financial institutions passed the recent European Banking Authority administered stress tests, findings were sobering, suggesting that had the test been more stringent, many would have failed. The results raised concerns that the industry is not resilient enough to withstand another economic crisis.
Banks will need to “demonstrate that the quality of their data and models is sufficient to reliably identify future risks and that they have sound processes in place to manage these risks”, said Moody’s Analytics senior director, Burcu Guner.
The average salary increased in July to 16%, meaning that one could, on average, expect a 16% increase on their base salary from moving company to another. This is a slight improvement of what was witnessed the prior month which fell to its lowest in 2016, at 13%. Organisations are still airing on the side of caution when it comes to cost and therefore, offering salary increases that are reasonable but nothing extraordinary.
Professionals seeking new roles July ‘16
Average change in salary each month July ‘16
Morgan McKinley Compliance Salary Results, Powered by Emolument.com
Compliance Professionals in Asset & Wealth Management
Compliance Professionals in Investment Banking
Compliance Professionals in US Investment Banking firms
Compliance Professionals in EU & UK Investment Banking firms
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Notes to Editors
Monthly new jobs and new candidates
From May 2013, the London Employment Monitor now uses Morgan McKinley’s own weekly records of new permanent and temporary job vacancies and new candidates registering with the firm for employment. Statistics for the full market are derived using Morgan McKinley’s market share.
* Chart (3) illustrates the average percentage change between original salary and new salary offer for professionals securing new roles each month.
Compliance Professionals Salaries and Bonus Data
Charts (4 - 7) data powered by Emolument.com, retrieved 05/08/2016, and provided directly by Compliance professionals in Investment Banking and Financial Services industries.
About Morgan McKinley
Morgan McKinley is a global professional services recruiter connecting specialist talent with leading employers across multiple industries and disciplines.
With offices across Ireland, the UK, EMEA, Asia and Australia, the company’s professional recruitment expertise spans banking & financial services; commerce & industry and professional services. Morgan McKinley is a preferred supplier to many of the major employers in its specialist sectors and thousands of smaller local firms.
In 2015 Morgan McKinley was awarded Best Banking & Financial Services Recruitment Agency at the Recruiter Awards 2015.