On paper, 2018 should be an awful year for London banking jobs. In fact, London finance recruiters are peculiarly bullish about the year to come.
The case against finding yourself a new front office finance job in London in 2018 is all too clear. 2018 is the year preceding Brexit and as we're endlessly reminded, jobs are due to start moving out of the City in the first quarter. Banks are already priming new offices in Paris, Frankfurt and Dublin; international schools are already reserving places for banking progeny; local housing markets are already heating up. Couple this with recruitment firm Morgan McKinley's estimation that new banking jobs advertised in London were down 20% year-on-year in November, and it all looks a bit doomy.
Recruiters, however, seem to be inhabiting a parallel universe.
"The extraordinary thing is that it looks like there will be a lot of hiring in London next year," says Christian Robbins at macro-focused fixed income recruitment firm Tradestone. "Clients are telling us they're gearing up."
"We're really quite busy. I'm pretty positive about next year," says the head of an equities-focused search boutique, speaking on condition of anonymity. "There's a lot going on - people are hiring."
"We're incredibly busy - we already have loads of mandates for next year," echoes Andy Pringle at recruitment firm Circle Square, which focuses on investment banking and capital markets hires. "There's going to be a lot happening."
This ebullience is partly to be expected: finance recruiters are optimistic by nature; even when the roof is falling in, they'll insist they're warm and dry. However, when things are going badly, pain is often discernible, and for the moment recruiters seem blithely pain free.
The cycle is turning
London recruiters' enthusiasm for 2018 can be traced to the banking revenue cycle. After several difficult years, revenues are expected to return to growth, and growth should bring hiring.
In a research note this week, J.P. Morgan's banking analysts predicted that revenues in fixed income sales and trading will rise by 4% next year, that equities revenues will rise by 3% and that investment banking division (IBD) revenues will rise by 2%. This follows the analysts' predicted declines of 11% and 6% in fixed income and equities revenues for 2017, and predicted IBD growth of 10%.
In other words, while IBD revenue growth might slow next year, markets revenues should swell.
"The cycle is turning," says the head of the equities boutique. "We had a long lull from mid-2015 to early 2017 and since then things have picked up. Clients are implementing growth plans for next year."
In the macro (FX and rates) trading world, optimism is traceable to the changing rates environment. Goldman Sachs is predicting that the Federal Reserve will hike rates four times in 2018 and the European Union is expected to begin tapering quantitative easing. "With the macro and rates environment changing, everyone generally feels more positive. Clients think 2018 is going to be an interesting year and they want to prepare for that," says Robbins.
And in M&A, the expectation is that global deal values will increase and that UK-based firms will be at the forefront of any activity. "UK corporates want to buy internationally so that they can generate overseas incomes in different currencies," says Pringle. "Banks and boutiques need staff to work on these deals."
Brexit-exits are chimerical
For the moment, banking recruiters in London seem untroubled by the prospect of their clients and candidates disappearing to mainland Europe. Again, this may be a question of wishful thinking, but they have their reasons.
"Brexit isn't going to affect M&A jobs," says Pringle. "Or if it does, it will only affect M&A jobs in big banks. You have plenty of people in London working in M&A boutiques and those boutiques are still hiring heavily."
Similarly, although Bank of America said last week that it plans to move 200 sales and trading jobs to Frankfurt and Paris imminently, there have been indications that fewer markets jobs might move than originally expected. HSBC, for example, originally said it would move 1,000 jobs to Paris, but suggested last month that this could be reduced. To begin with at least, banks could practice "back to back trading" in which trades would be booked overseas but executed in London and "reverse solicitation", in which London's financial prowess would be solicited by European clients rather than actively touted to them. This being the case, there are claims that the City could operate (almost) as usual.
Of course, this might all turn out to be wishful thinking, as some recruiters admit.
"It feels positive now, but revenues can hit a brick wall at any time," says the equities headhunter. Having hired heavily in 2017, some banks have already said they'll sit on the sidelines next year: Credit Suisse CEO Tidjane Thiam told investors the bank has no intention of continuing to recruit in equities, for example, and that he now wants to see revenues come through in the next 18 to 24 months.
Meanwhile, the new notion that Brexit might not be so bad for London could be upended at any time. If so, headhunters in Europe are ready and waiting: "Hiring over here has already picked up," says Tim Zühlke, a partner at Fred Executive Search in Frankfurt. Despite the ongoing lack of clarity over Brexit, banks like Goldman Sachs, Citi and UBS have already committed to a bigger Frankfurt presence: "Whatever happens with regards to Brexit, banks are going to see Frankfurt differently in future," says Zühlke.
There's also the possibility that Brexit is a distraction from an even bigger threat to London banking jobs in the form of a socialist government under Jeremy Corbyn. Last week, Bobby Vedral, a London-based partner at Goldman Sachs told private equity investors that a Corbyn government would be disastrous for Britain's finance industry and turn the country into a, "Cuba without the sun."
"Everyone's scared of Corbyn," confesses the head of the equities search boutique. "Personally, I think he's peaked," he adds hopefully.
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