“The desire to hire is strong. The drive to take on new opportunities is strong. Everyone’s just waiting for the government to get on with it.”
Morgan McKinley London Employment Monitor February 2017
With an 81% increase in jobs available and an 83% increase in professionals seeking jobs, the supply and demand of jobs and professionals is a balanced and welcome start to the new year. Nevertheless, January 2016 saw a 115% increase in jobs, making this year’s spike muted in comparison. “If the January jobs surge isn’t in the triple digits, something’s off”, said Hakan Enver, Operations Director, Morgan McKinley Financial Services. “Until the terms of Brexit are known and put in motion, the jobs market will remain cautious”.
The 83% increase in job seekers month-on-month is coupled with a 29% decrease, year-on-year. Contributing to the decrease is the trickling off of non-British EU nationals working in the City, who comprise up to 10% of its workforce. In a post-Brexit survey of professionals conducted by Morgan McKinley, these individuals reported either moving abroad, or considering leaving London because of Brexit. “Many of our non-British clients are choosing to return home, or seeking opportunities elsewhere in Europe”, said Enver. “People wanting to get ahead of the threat of having their right to work revoked is understandable, but is a huge loss for the City”.
On Wednesday, the House of Commons voted against protecting the residency rights of EU citizens already residing in the United Kingdom. Though the vote has no immediate legal effect, it leaves existing EU nationals in limbo, and acts as a deterrent to top talent from the continent who might otherwise have considered a career in London. The government has said freedom of movement is a key negotiating tool for Brexit talks with the EU, leaving many to hold out hope that a mutually beneficial solution is forthcoming in the months ahead.
Chief executive of the British Bankers Association, Anthony Browne, characterized financial institutions as “quivering over the relocate button”. And indeed the ongoing instability is affecting businesses: According to a survey conducted by the market research company Ipsos MORI, 58% of business leaders from Britain’s largest firms reported Brexit having already had a negative impact on business. In addition, a January EY survey reports that half of the financial services institutions that threatened to relocate staff have already done so.
Paris, Dublin and Frankfurt are among the top cities hoping to replace London as Europe’s financial capital. “When you add up the half million people who work in the City of London and their spouses and children, you’re looking at over triple the population of Frankfurt, and over half the population of Paris”, said Enver. “It’s all well and good to put on a charm offensive, but without the infrastructure to absorb the City’s financial services industry in full, it’s wishful thinking”.
A more likely scenario is a decentralized approach in which institutions spread operations out across a handful of cities. Most large institutions have drafted plans for relocating a percentage of their trading operations to other cities. “Whether the relocation preparations are contingency plans or idle threats remains to be seen”, said Enver. “That said, it’s hard to imagine a scenario in which a hard Brexit doesn’t trigger some movement out of London".
It isn’t all bleak, however. A handful of top financial services institutions are openly shopping around for new office space in Canary Wharf, and a survey conducted by the salary benchmarking site Emolument found that 59% of financial services professionals expect their company to perform better in 2017 than it had in 2016. In a nod to the future, millennials and tech professionals were particularly optimistic about the business climate ahead. “The desire to hire is strong. The drive to take on new opportunities is strong. Everyone’s just waiting for the government to get on with it”, said Enver.
In January, the Supreme Court of Britain ruled that Prime Minister Theresa May lacked the authority to trigger Article 50 without the consent of Parliament. The ruling caused a scramble on both sides of the Brexit debate as MPs vied for influence on the terms of the transnational divorce proceedings. Despite early bluster from some MPs, however, the House of Commons voted overwhelmingly to give May a green light to trigger Article 50. The decision must now be approved by the House of Lords.
Signalling a shift from previous months, EU leaders are taking a more conciliatory approach to Brexit discussions. German Finance Minister Wolfgang Schaeuble underscored the importance of a close working relationship between the EU and British economies, saying the City “serves the whole European economy”. Many welcome the thawing of tensions. “The more amicable the Brexit divorce terms, the better it is for everyone. The rhetoric coming from EU ministers shortly after the referendum, to what we are hearing now, is somewhat different”, said Enver.
With financial services bonuses going to an ever smaller portion of the overall workforce, professionals are finding that the best way to secure a financial bump is to change jobs, negotiating a significant increase between the two positions. “We’re seeing people negotiate as high as 18% salary increases when moving shops”, said Enver.
In the early days of his presidency, Donald Trump signed an executive order calling for a review of the 2010 so-called Dodd-Frank financial services regulations. While it remains unclear what recommendations the review will result in, deregulation is expected. The British financial services sector anticipates a loss in competitiveness if its own regulatory system does not mirror America’s. The scramble to adapt will be complicated by the mix of EU regulations that continue to govern the British banking sector. “If London doesn’t adapt to Dodd-Frank changes, then we should worry about losing jobs to New York much more than losing jobs to Frankfurt”, said Enver.
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