Scotland's financial services jobs market is now frozen, and bordering on contraction

The jobs pain hitting the City of London has been slow to creep up to the financial services sector north of the border, but finally the crisis appears to be taking hold.

A report released this week by the University of Strathclyde's Fraser Allander Institute revised its economic growth forecast for Scotland to an anaemic 0.4% growth for 2011 and warned that the country at risk of recession because of continuing troubles in the eurozone.

Unfortunately, it's the slowdown in the financial services sector that is cited as one of the main reasons for this. Business and financial services account for 26% of Scotland's GDP, so "any slowdown in the pace of growth is concerning", according to Lindsay Gardiner, head of assurance services at PwC in Scotland.

Perhaps more concerning to those employed in the sector is that fact that the financial services jobs market suddenly looks a lot more frosty.

"We are likely to see a freeze on recruitment in the short to medium term and even job losses," says Gardiner.

There are already signs that recruitment activity is tumbling. A number of international investment banks have their back office operations in Scotland and, as we pointed to previously, most have largely frozen headcount in line with the policy across the organisation. Barclays Capital, meanwhile, has already cut jobs.

Similarly, Lloyds Banking Group has largely stopped recruiting in light of the latest plans to reduce headcount by up to 15,000 and now Clydesdale Bank has suggested there may be a need to cut back. RBS is, as its Q3 results showed last week, struggling but recruitment sources suggest it's still hiring relatively aggressively north of the border.

There are still some reasons to be positive, however. The financial technology space remains relatively active, with both banks and vendors such as Avaloq providing new opportunities. The asset management back office operations - such as State Street and BlackRock - are also still bolstering their headcount north of the border.

There's also the ongoing recruitment spree at Tesco Bank.

Generally, though, a new feeling of uncertainty and caution has engulfed Scotland's financial services job market and recruiters north of the border are becoming increasingly exasperated at the lack of clarity over hiring plans for next year and paralysis in signing off for new roles.

All this has to be tempered by the fact that this point in the year is generally a slow period for recruitment, but it's the lack of clarity about 2012 which is giving many in the industry cause for concern.