London Employment Monitor December 2014 highlights:

• Year-on-year figures show 4% increase in City job vacancies
• The number of professionals seeking to move drops by 7%
• Those securing new positions increased salaries by an average 18%

MORGAN MCKINLEY LONDON EMPLOYMENT MONITOR

City recruitment shows no sign of decelerating

While the number of job opportunities remained flat compared with October figures, -0.8% to 7,350, year-on-year recruitment was up 4%, continuing the growth story of Q3 and Q4. Professionals seeking new roles were down 7% month-on-month and 3.5% year-on-year to 8,321. This shows a 7.5% squeeze in the gap between opportunities and potential candidates over the past 12 months.

“An element of lethargy tends to enter the market at the tail-end of the year,” says HakanEnver, Operations Director, Morgan McKinley Financial Services. “Additionally, a positive year means bonuses for those in eligible fields, and postponing a move until the new year is a seasonal pattern.”

For those prepared to move, average salary uplift remains a healthy 18%, and could rise even higher next month. “While volumes are lower in December, those who do start new roles before the New Year tend to be offered high incentives to do so,” says Enver. “Rising salaries are here to stay.”

Popular tests of economic health such as the Lloyds Bank Purchasing Managers Index (PMI) show higher output growth across England and Wales. November’s PMI recorded “the fastest rate of expansion in four months and was close to March’s record high.”

“There is a tailwind of overall economic growth across the UK that is helping accelerate employment volumes in City firms,” says Enver. “The Index of Services [produced by the Office for National Statistics] shows a 3.4 % rise year-on-year and that services now account for 78% of UK GDP.”

In this environment, there is a need for employers to move fast to secure talent. “We see clients who display some caution in decision-making losing out on key skill sets. By the time they confirm a hire, the prospect has already taken an alternative opportunity. It also plays well with a company’s brand to be seen as dynamic, responsive and able to move quickly.”

Growth in M&A swelling demand

A return of M&A activity is also proving positive for City firms. Deloitte’s quarterly insight forecasts that the value of M&A deals will break through $150bn by year end, as cash-rich US corporates, particularly those with large overseas reserves, are taking advantage of European target companies dogged by “tepid growth”.

IPO activity in the UK is not yet at pre-crisis levels, but there continues to be high-profile examples such as Virgin Money, with a post-IPO valuation of £1.25bn and the successful listing of Carrie Bradshaw’s favourite shoe-maker, Jimmy Choo, with a market capitalisation of £546m.

“Increasing M&A activity impacts the banks and private equity firms and we can see this translating into job opportunities.”

Election and EU uncertainty may be injecting caution into the market

For all the economic activity levels and optimistic mood, there is some evidence that non-urgent recruitment is being put on hold.

“We can see a potential wave of increasing demand in 2015, as some employers postpone major hiring drives until there is greater certainty following the UK election and EU membership debate,” says Enver.

Urgent under-supply in risk and compliance leading to big remuneration packages

The shortage of specialists in compliance and risk that began to be felt in the summer, as was also reported by Deloitte, has only been exacerbated by the increase in penalties levied on banks by the UK Financial Conduct Authority. Year-to-date penalties are already three times those of last financial year – at the time a record – at £1.39bn.

Increasing demands in the overall regulatory framework for financial services show no sign of abating, just as the risk profession, once peculiar to FS, is now in demand by every corporate board looking to mitigate corporate risk and meet increasing demands of corporate governance.

“They are in such high demand, risk specialists are commanding record salaries,” says Enver.

Talent shortage continues to dominate C-Suite agenda

Recent research by the Centre for Economics and Business Research (CEBR) showed that unfilled vacancies are costing the British economy £18bn, with over half of all vacancies remaining unfilled after a month and 27 per cent unfilled after three months. The cost to the financial and insurance sector is costing employers £129.im, according to the report.

This was echoed in a survey reported by City A.M. that suggests that two thirds of firms acknowledge “talent shortage” is their biggest recruitment challenge while having no measures in place to deal with the lack of employee supply.

The importance of skilled talent to the City’s competitiveness in the global marketplace is underlined by a survey by Citigroup and the Economist Intelligence Unit that reports, “the most significant advantage that developed country cities hold is their ability to develop and attract the world’s top talent.”

Shortages are being impacted by UK restrictions on working visas for those outside the EU community. “This is becoming a serious problem,” says Enver, “as many talented specialists are unable to work in the UK.”

Conversely, “there is increasing activity both by employers and candidates from European countries with similar banking regimes to the UK with good language skills, being able to speak the language and conduct business with counterparts in the European Union is a real advantage,”

“We see a flight of talent away from France in particular, where ‘who you know’ trumps ‘what you know’. London is seen as offering a meritocracy that today’s professional relishes,” says Enver.

Financial services jobs new to the market November ‘14

Professionals seeking new roles, both in and out of employment November ‘14

Average change in salary each month – November ’14

Median Compensation Packages (Salaries + Bonus) for Risk Management Professionals in Investment Banking Financial Services, London – November ’14