London Employment Monitor December 2016 highlights:
- 27% decrease of jobs available, month-on-month
- 16% increase of jobs available, year-on-year
- 46% decrease in professionals seeking jobs, month-on-month
- 7% decrease in professionals seeking jobs, year-on-year
Jobs outlook brightens, but demand for professionals outpaces supply
December 2016 offered a more promising employment climate than its 2015 counterpart, but thanks to a year marked by political upheaval and economic volatility, a record amount of City professionals put off job seeking until 2017.
Bonus season and the Christmas holidays always generate a drop-off in job seekers. Nevertheless, the 46% month-on-month drop is remarkable. “After months of uncertainty, City professionals are jaded. The good news is, when they’re ready to start looking in the new year, they’re looking at a growth in jobs”, said Hakan Enver, Operations Director, Morgan McKinley Financial Services.
As institutions reach the end of the fiscal and calendar year, most have exhausted their hiring budgets and are forced to wait until after the new year to release jobs. “December is always a quiet jobs month, so a drop in jobs month-on-month is to be expected”, said Enver.
Jobs available have been on a rollercoaster throughout 2016, with the final quarter of the year marking a decline. The year-on-year data, however, show that the year is continuing to outperform 2015. “We’re going into 2017 with an improved jobs landscape and expect to see a spike in hiring”, said Enver.
Bonus season leaves increasing number of professionals behind
Bonus season is underway in financial services capitals worldwide and signs point toward fewer and fewer City employees receiving any year end handouts. According to Emolument data, the number of bankers who received no bonus at all – a so-called “doughnut” – in December 2016 was 13%, almost double the amount from December 2015.
“Institutions are having to be more strategic than ever with bonuses”, said Enver. On Wall Street, the bonus system remains the key incentive tool used for retaining top talent, but in the City, a combination of stricter regulations and less fee-based revenue mean that banks operating in Britain are scaling back and changing their staff compensation models.
Number 10 muddles through as London fights back
News that a Brexit divorce could stretch out over the course of a decade is only adding to the concerns of investors and institutions. “The City is displaying tremendous resilience, but the longer the government leaves the questions of passporting and freedom of movement unresolved, the greater the cost for the British economy”, said Enver.
Institutions are growing weary of the ongoing silence and confusion from the government. “If there is not a clear transitional period decided early in the process, where passporting rules still apply for a few years after negotiations, then we would likely have to accelerate our timetable in complying with new rules”, said JP Morgan CEO Jamie Dimon.
In an effort to maximise opportunities and thwart pitfalls in the months and years ahead, London Mayor Sadiq Khan launched a Brexit Expert Advisory Panel in December. The panel is tasked with advising him on the risks and challenges that Brexit poses to London and is composed of leaders from a number of key industries, including financial services. “Securing privileged access to the single market, maintaining a world-class financial sector and ensuring London can continue to attract global talent are all recurring themes”, said Khan.
In January the Supreme Court will rule on Article 50. The government has appealed an earlier decision that stipulated that it alone lacks the authority to trigger Brexit and must have the consent of parliament. A second case in the courts that has significant implications for City employment is regarding Article 127 of the EU’s Lisbon Treaty. The High Court is reviewing whether or not the triggering of Article 50 would automatically exclude Britain from the single market. Both decisions threaten to derail Prime Minister Theresa May’s promise to trigger Article 50 by the end of March 2017.
A year of ups and downs provides more questions than answers
If 2016 was a year marked by changing political winds, 2017 will be the year in which the reality of the growing populist sentiment that is sweeping the globe will play out in practical terms. “Voters have spoken. Whether or not their decisions in Britain or farther afield result in economic doom and gloom or a mere reordering of how we do business will depend on the efforts of our political leaders”, said Enver.
There was more to 2016 than Brexit and Trump, however. In the past year, London saw 200,000 new jobs created and was ranked the start-up capital of Europe four months after Brexit. “Brexit has huge regulatory implications, but it can’t topple London’s creativity and productivity, both of which shone throughout 2016”, said Enver. “London thrived despite the political turmoil and continues to be invaluable to the British economy”.
Often drowned out by heftier headlines, a looming banking crisis in Italy is expected to reverberate across European institutions. Combined with elections in France and Germany where similarly protectionist and anti freedom of movement parties are making headway, 2017 has everyone guessing what will happen next.
Average Salary Change
“With the sharp decline in jobs during Q4 of 2016, it is no surprise to see the average salary change eventually fall to 13%. We witnessed a similar trend back in December 2015, with the majority of hires being made at AVP level and below. At this level, the likelihood is that firms will continue to invest in talent as there is minimal expectation to buy out any form of additional compensation” says Enver.