25% redundancies across the board?

3 October 2011

3 minute read

There is bad news this morning. The CBI and PricewaterhouseCoopers have finished their latest survey of UK financial services firms and concluded that there will be 8,000 job losses in the UK industry over the next three months. If this happens, 90,000 UK financial services jobs will have been lost since 2008.

The CBI/PWC prognosis follows various other gloomy omens. Last week, it emerged that Man Group, the UK's largest hedge fund manager, was doubling its redundancy plans from 10% to 20% of staff. And as JPMorgan's Jes Staley intimated out last month, investment banking revenues have now collapsed along with markets revenues (securities underwriting is at its lowest level since 2008), suggesting there is nowhere to hide.

The implications of this will be clearer when investment banks issue their third quarter results in the next few weeks.

In the meantime, the harbingers of doom are out in force. "Everyone is talking about a tsunami of redundancies," says one markets headhunter. "Redundancies could be as much as 25% across the board," says hedge fund manager Lex Van Dam in our Friday column.

And: "If there's one thing senior investment bank executives know how to do when faced with compensation pressure, it's fire people. Lots of people," points US financial blogger Epicurean Dealmaker, whilst claiming "everyone" on the trading floor is about to get fired.

Big redundancies have happened before in investment banking. Between 2007 and 2008, UBS eliminated 30% of its staff and Goldman Sachs eliminated 17%. Some of the most impressive cuts in living memory were at Renaissance Capital, which removed 40% of its staff in late 2008 and 2009.

However, there remain a few reasons for optimism.

Firstly, the CBI's figures refer to all financial services jobs, including retail banking and building societies. Those 8,000 job losses will not be restricted to the City. They also amount to no more than 7% of the UK's total financial services employees.

Secondly, those banks that cut employees in 2007 and 2008 were hiring them again a few years later. Goldman Sachs had rebuilt staff numbers by the third quarter of 2010. RenCap followed its panicked firing with some panicked hiring. It is this that is the last bastion against mass layoffs in the months to come. Recruiters claim the last switch from hiring to firing is still discouraging banks from axing double digit percentages of their workforce for fear that markets might rebound. Hopefully they are right.

AUTHORSarah Butcher

Global Editor

Ri
Ricky
3 October 2011
Any serious point you are trying to make about banking job losses is waylaid by your snobbish comments about non bankers. As to your harping on about Argos, it's all very predictable and clearly suggests that you're a smug and pompous individual. I work in Investment Banking and sometimes shop in Argos, if you want to buy the same rubbish from Selfridges at twice the price to feed your insecurities then more fool you.
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it
its time
3 October 2011
the good news is that the dole offices have done away with those nasty yellow plastic bucket chairs and replaced them with more comfy ones.
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gw
gwen
3 October 2011
25% easily. For banks to be profitable again, the hard truth is that they will need to go through a huge consolidation period and lay off en masse. 40-50% across the board. UBS will provide the blueprint for this. IBs will go back to concentrating on core services to core clients and won't waste time bidding on non-core services. IBs will be more like Hedge Funds / Advisors again. Banks are just not profitable in their current state and that is before we have even begun to quantify the impact of Basel III - a lot of structured products businesses right now will just have to be shut down. The hard truth in all this is that there are plenty of people who currently earn more than they bring in revenues.
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Wi
Wizard of EC1
3 October 2011
If this was in the manufacturing sector, the air would be thick with government ministers flying in by luxury helicopter to do TV interviews.
The multiplier effect of this will be multiple times those jobs losses in dependant industries ...... I hope all those pub experts that despise bankers lose their jobs as cab drivers and have to sell their sovereign rings to pay for the children's Christmas presents from Argos.
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Pe
Peter
3 October 2011
London will have no more than 5,000 fin services jobs by the end of the decade. The game is obviously over.
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