Mark Carney is not just one of the most highly paid central bankers in the world, he is also turning into the man who might reinvigorate recruitment into the City of London's banks.
As we noted earlier this week, hiring into bank jobs in London continues to founder. Recruitment firm Astbury Marsden estimates that the number of jobs on offer in the City was 27% lower in July 2013 than in July 2012. Banks like UBS still have redundancies to make.
In the circumstances, Carney's declaration that he'll keep interest rates low until 2016 - assuming that unemployment remains above 7%, that inflation remains below 2.5% and that Britain's financial stability isn't threatened, should provide some solace for City of London job seekers and recruitment firms. Both have been struggling.
"Mechanically, having low interest rates in the UK market should boost equities and as a result we should see more ECM [equity capital market] deals," says Stephane Rambosson, managing partner of executive advisory search firm Veni Partners and former head of equity capital markets for French speaking countries at Citigroup.
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The UK ECM market has had a reasonable year so far, with equity issuance up 64% year-to-date compared to 2012 according to Dealogic. If rates stay low, things could be about to get even better, says Rambossen. "IPO pipelines in Europe and the UK are remarkably healthier compared to this time last year. Carney's policy should contribute to the market’s revival and will be good for hiring in the ECM market."
M&A recruitment revival
It's even possible that Carney's commitment to low interest rates could help revive the UK M&A market, which has been flagging - with deals down 7% on 2012 according to Dealogic's figures. "Low interest rates should be good for M&A," says Chris Wheeler, banking analyst at Mediobanca in London. "Funding is cheaper and more stable and low rates should mean the value of your shares rising - which is a good thing if you're buying an unlisted company."
"The UK M&A market has been pretty dead this year," says one senior UK M&A banker, speaking on condition of anonymity from a beach in France. "This could be helpful - the knowledge that interest rates will stay low provides greater stability and anything that encourages stability should help encourage corporates to make acquisitions."
Logan Naidu, CEO of recruitment firm Dartmouth Partners, says banks in London are already ramping up demand for M&A analysts and associates in anticipation of more deal making activity to come. "There's very strong demand for M&A staff at the junior end," he says.
Carney aside, Rambossen predicts that the Prudential Regulation Authority's demand that bank plug a £27bn hole in their balance sheets (a request which originated with Mervyn King), could also be good news for banking jobs. "We’ve already seen Barclays’ issue – other banks are likely to follow, creating demand for FIG –focused ECM professionals,” he predicts.
While Carney's low interest rate policy should theoretically lead to a strong UK equity market and a strong UK equity market should theoretically promote equity capital markets issuance and encourage M&A, it's worth noting that reality is rarely that simple.
Yesterday, the UK FTSE 100 fell sharply after Carney's announcement. Contrary to Carney's intention, markets read that interest rates will rise rather than remain stable. Carney made continued low benchmark rates contingent on inflation remaining below 2.5%; UK inflation was 2.9% in June.