Whether your view on Brexit can be characterised as good, bad, or indifferent, there can be no doubt that the City of London and its myriad financial institutions have been – and will continue to be for many years to come – heavily affected by the failure of the negotiating parties to secure a trade deal offering direct market access to the EU on the part of British organisations. Many interested parties continue to grapple with the question: Will Brexit liberate the City of London from its regulatory chains and open up new avenues of opportunity? Or will Britain’s decisions leave London’s money maker languishing? And perhaps most difficult to answer – will the pandemic ultimately be to the City’s advantage in mitigating the worst of Brexit’s predicted brain drain?
We cannot begin to answer that question without much more hard data and distance from 2020, but one thing is clear to those of us who are up close and personal with the most recent market moves: employers that fail to adapt their hiring strategy in response to the massive changes we are experiencing following both Brexit and Covid are losing out and falling behind in the race for the most qualified FS professionals.
The shift, in numbers
“Statistics never lie!” said no-one ever in the history of the financial industry. But what is the story on the ground-floor of the City’s skyscrapers? So far, media analysis of what data we have so far on Brexit (provided by an array of think-tanks, universities, government bodies and other interested parties) seems to have been primarily on the permanent movement of capital, liquid and illiquid assets. The New Financial think tank counted over 400 financial firms which have moved a combined estimated trillion pounds (that’s £1,000,000,000,000, for the non-bankers among us) (1) in assets to EU-based locations. A secondary major concern has been the location of permanent jobs within banks and FS firms, not to mention the relocation of both EU citizens working in the financial sector, and those non-EU citizens who nonetheless feel keenly the loss of their freedom of movement. For their part, employers have massively thrown in with EU strategies, the early blow of Brexit characterised by panic in labour markets pre-2020, even before the promise of a bespoke financial services deal was snuffed out by months of unproductive negotiations. In the last two years, media coverage on the relocation of functions, departments, or sometimes whole organisations to locations within the EU like Dublin, Paris, Frankfurt and Amsterdam has exploded.
Traditional banks had more options for Brexit-proof staff planning in comparison to other financial institutions and private companies. A historical structure of in-branch banking means they are more likely to have well-spaced satellite operations across Europe ready to accept staff transfers, especially if they have had multi-nationally distributed offices since before the EU grew to its current strength. That same versatility has allowed them to move their wealth abroad as, or more easily than their human resources, panicking many onlookers. New Financial’s report counts an estimated 900 billion pounds in assets to the EU so far from banks alone, and this argument is borne out by further data from EY whose Brexit Tracker (based on Twenty-four of the largest Financial Services Firms) estimates that there are £1.3 trillion in assets which are at risk of being moved as of March 2021. (2)In the reaches of top tier investment banks, there are big plans for expansion at JP Morgan, Morgan Stanley and Goldman Sachs in mainly European sales departments, to the decrease of sales staffing in London, although the consensus seems to be that trading is less likely to move (3), and that those staff who are moved are likely to be significantly more senior and highly paid (4).
A lens on temporary and agency staffing
If you are an avid reader of the latest recruitment facts and figures, it is easy to get the impression that interim and contract staffing is the Cinderella of the family, quietly taking care of all of the undesirable work of scrubbing the floors without a word of thanks or acknowledgement. Permanent staff numbers are significantly easier to obtain, and it is hard to get a handle on exactly how much revenue is bound up in the contribution of temporary staff to the London FS sector. We will attempt to loosely extrapolate from the existing data in conjunction with market knowledge gained from specialist recruitment cover.
Starting from the bottom up, 2020’s sector-agnostic employment figures show that at 5.3%, the UK boasts a relatively low percentage of workers in temporary employment compared to the OECD average (5), although that doesn’t specify what type of temporary that means (fixed term, casual work, seasonal). The LBS (Labour Force Survey) is slightly more useful and up-to-date, allowing us to zoom in more closely on what proportion of workers are Agency temps or on FTCs – in Q1 of 2021, there were 1,524,000 temporary employees in total, a noticeable increase on the same period of both 2020 (1,493,000) and 2019 (1,485,000) although not quite returning to the heights of 2017 or 2018 which exceeded 1,530,000. Although these figures are raw and not seasonally adjusted, SIA (a global advisory firm on staffing and workforce) estimated that the temporary staffing increase within 2021 is an actual increase and not merely seasonal extras – despite the lockdown that took place from January to March.
There was also a huge hike in FTCs this year to 761,000 from 619,000 last year, which should be unsurprising news to any recruiters or agencies within the FS field. Faced with the dilemma of employers being unwilling to take on the long-term drain of permanent headcount when the market remains so uncertain due to Covid, the FS sector would usually turn to temporary staff in order to remain dynamic and strategically nimble with regards to hiring decisions. However subjective evidence from agencies and recruiters suggests that organisations remain equally leery of temporary contracts as permanent contracts. Banks in particular are determined that operationally critical staff must commit to the length of their contracts, and the difficulty of on-boarding temporary workers without all staff returning to the office is compounded when a month of training is required in many cases for temps to get to full productivity.
This reluctance to use temporary staff to fill the gap in the same way as firms have traditionally done for other challenges like uncertain post-recession recovery periods at least cannot be blamed on Brexit, and it would be impossible (at least without a crack team of researchers on a ten year study, and a very large budget) to even begin to untangle the financial impact of the pandemic from the EU exit – but either way, it is clear that for now, employers have perhaps grudgingly settled on a ‘middle way’ of risk-mitigated employment accomplished by increased usage of fixed-term contracts. This is a draw for some Brexit-affected City workers, fearful of their jobs in London but reassured by the security of a 9-month or one-year fixed term contract with the possibility of extension down the line, however it lacks the essential flexibility, freedom and agility that both employers and skilled FS temporary and contracting staff prefer.
Conclusions, takeaways and predictions for Q3 & Q4 of 2021
Though there were no official figures on temporary/FTC staffing numbers specific to the banking and FS sector uncovered during the writing of this article, the findings within generally bear out the general trends witnessed by recruitment agencies in the Banking and FS sectors throughout 2020-2021.
FTCs are this year’s big winner of interim and temporary recruitment, but temporary staffing as a whole continues to grow year-on-year and there are no concerns on the ongoing popularity of temporary contracts. The traditional boundaries and separation between FTC and temp are being blurred, with longer notice periods offered on temp contracts, and workers leaving FTCs when offered better salaries and prospects elsewhere.
Jobs that have shifted to Europe are primarily permanent roles in sales departments to include fixed income and more senior strategic positions, although investment banks have seen a larger trend of European relocations compared to corporate banks. It is clear however that employers must see the financial advantage in moving staff currently sited in the City to their European offices – as they are having to pay more for the privilege.
EU citizens in particular are especially keen to secure FTCs and are less enthused about temporary contracts – especially juniors and those new to the UK market, who might not have the 3 years of residency that settled status required, however we expect this to change soon especially if the market remains buoyant and the pull of experience that temporary and contract work can provide for staff who would not otherwise have the experience to walk into the larger and more established institutions.