eFinancialCareers hiring survey paints gloomy picture

The gloom in the financial services job market looks set to deepen for the rest of this year, the latest hiring survey by eFinancialCareers.com shows.

Employers are planning overall headcount reductions in London in six of the seven sectors surveyed - fixed income, equities, corporate finance, fund management, custody and private banking.

Only private equity bucks the trend, with a slight increase forecast. The survey of headcount plans for the fourth quarter of 2002 was drawn from 110 responses from 75 firms across the sectors.

The picture looks worst in corporate finance. Eighteen percent of firms said they expected to cut headcount by more than 5%, while smaller cuts were planned by another 9% of respondents. No firm expected to raise headcount. The figures were nearly as bad for equities.

Headhunters pointed out that hiring is traditionally slow in the fourth quarter, as it can involve buying out large bonuses and employers are finalising budgets for the following year. But few recruitment firms expected a big improvement in the first quarter next year.

The sharpest deterioration has occurred in fixed income, compared with the results of the same survey three months ago for the third quarter. Then, half the fixed income respondents planned to raise headcount; this time the figure is just 8%, with the same number planning a reduction.

But not all the trends are downwards. In both corporate finance and equities, the rate of planned headcount reduction has slowed since the last survey. In all sectors, the great majority of firms said they planned no headcount change at all in the fourth quarter.

In private banking, 10% of firms said they planned to raise headcount by more than 5%, while in fund management the figure was 4%. Though others were planning reductions, the net effect was that job losses in both sectors would be small.

Custody fared less well, with reductions outnumbering increases by nearly three to one.

But private equity can expect a small headcount increase, with 8% of respondents planning to take on staff and none expecting to cut.

In most sectors, departments shedding staff tended to be large, while those planning an increase were small.

Weighted for size of departments, only private equity showed an overall expected headcount increase.

A Recruitment Index devised by eFinancialCareers, based on the weighted figures from all sectors, now stands at -15.8, down from 11.4 last time and 17.1 in the first survey, which looked at the second quarter.

Headhunters said selective hiring was continuing in all sectors even as institutions slimmed down.

Joe Haim at Egon Zehnder said: "Large banks have been declining as far as private equity is concerned. But some independents are recruiting more, and they are doing so mainly from other private equity firms.

People are more willing to move from these than in the past because their 'carry' prospects (of higher pay from successful investments) have diminished."

Haim said it had become harder for corporate finance experts in banks to get private equity jobs.

James Hickman, at Russell Reynolds, said: "There is a little bit of hiring by private equity firms for their own needs, but not much - and they tend to want people from industry with operational skills, not people from banks with financial skills."

In fund management, Oliver Stanley at Armstrong International said: 'There is demand for cash management functions, but overall the job market is fairly flat. I can't say there's much demand for equity pickers right now."

Martin Simon at AMGM said that as markets have fallen, revenues of fund managers had fallen too - and some firms had been cutting headcount as a result. "But hiring is still going on - one team pulled out of one firm and joined another very recently."

David Reynolds of Sheffield Haworth said: 'In fixed income, a lot of managers are managing bonus expectations down - even credit derivatives, which has been strong recently, is being affected now, as a result of ratings downgrades."

In custody, Barnaby Parker of Project Partners said: "The model of outsourcing custody to specialist custodians is under scrutiny. This is affecting the job market as recruitment tends to pick up when some big change, such as outsourcing, occurs."

But Clare Maslen at Joslin Rowe said: "Global custodians are hiring, especially in client-focused roles to win more business. Custody jobs haven't been hit as much as the rest of investment banking as it doesn't depend on the markets."

Emma Weir, at Eban, said that while she expected net job losses in equities over the next 6 months, many smaller firms were showing signs of life. These included execution-only providers and specialist research firms, which were setting up with staff from bulge bracket firms.

Colin Jones, at Longbridge, said: "Mergers and acquisitions is very quiet. But some of the more complicated corporate finance work, such as project finance, is in better health.

'There will be some big bonuses there. And a number of initial public offerings are in the pipeline in the retail sector in the UK."

At Trezona and Co, Guy Trezona said: "The big Swiss banks are still doing well out of private banking because they have a sound cost base and clients around world.

"There is some demand for revenue producers and top relationship managers. Also for asset allocators in specific sectors, with expertise in fixed income, futures and options, currencies and commodities."