Will it be another year of two halves?

It has been a while since my last market update, so as we speed through Quarter Two, I wanted to give you an overview of what has happened in the first three months of 2023 in the financial services projects, change, and transformation space.

The market picked up quicker than expected for the first two months of this year after the annual slowdown in November and December. In January and for most of February, there were lots of new roles and reworks coming through, signaling that hiring managers still had requirements and budgets to support them. Organisations were opting for contractors rather than full-time employees to avoid committing to permanent hires due to the fragile state of the economy. This is a typical strategy when there is economic uncertainty and even more commonplace when there are multiple issues occurring at the same time, such as high interest rates, inflation, and geopolitical problems e.g., the war on Ukraine and hostile US/China relations.

However, since the collapse of Silicon Valley Bank (SVB) and the sudden demise of Credit Suisse, we have seen the market calm down across both temporary and permanent hiring as banks look to see what effect this will have on the financial services sector and global economy. Although UBS came to the rescue of the other Swiss giant, banks have started to have flashbacks of 2008 and the domino effect Lehman Brothers had on the markets.?

For those old enough to remember, things were very good for the change and transformation market in the years following the crash, as banks merged and new regulations were introduced thick and fast. Even though the banking system is in a precarious position at the moment, it is in a very different situation than before, with Credit Suisse having been on a downward trajectory for many years. The Federal Reserve remains confident in the strength of the US economy and has recently raised interest rates by 0.25% as a result, and it has also confirmed that it will look to raise them again at least once before the end of the year.

The projects and change financial services team has seen a sharp decrease in the demand for roles over the last 12 months, with only half of the volume seen in Q1 compared to the same period last year. However, recent economic data from KPMG and the Recruitment and Employment Confederation shows that organisations are slowly returning to the market to hire. As time passes, there is increased positivity that we won’t fall into a recession but companies are still looking for contractors rather than permanent employees, as there is more flexibility if things take a turn for the worse.?

During the first eight weeks of 2023, the main areas in which we saw an uptick in recruitment were: regulatory work (ESG, MiFID, LIBOR, consent order, FRTB), finance change (ledger, capital & liquidity), risk (operational, third party and market) and from office/operations (confirmations, settlements, trade capture). Below is a list of the skill sets that have been in demand, plus the ones that will be coming up over the next few months:

• Financial Crime - AML/KYC/Transaction monitoring
• Front office Regulatory experience (ESG, MiFID, LIBOR)
• Seeing an increase in HR Transformation, Digital, and Consumer Duty positions
• Global markets and OTC derivatives
• Finance BAs/PMs - Capital and liquidity knowledge
• Payments BA/PMs - SWIFT/ISO20022
• Market Risk BAs
• Generalist PMOs

Many of the well-known global banks and asset managers have issued a recruitment freeze, but I'm hearing that some project teams are desperate to hire - so I do not anticipate the freezes to last for too long. As the old adage goes - no news is good news. This will be the case while companies weather the storm and slowly come through it. Financial institutions across the globe are in a much better place than they were 15 years ago, largely due to the post-crash investment in regulatory mandates, especially around capital and liquidity.?

Although we are in unprecedented times, I expect hiring to pick up again once the initial shock of SVB and Credit Suisse has eased, which could be as soon as this week following the Easter break. This would coincide well with the start of the new financial year, budgets being confirmed, and it being the busiest period for recruitment after bonus season. Or it could be delayed until we get an indication that interest rates are at their peak and inflation is under control and coming down. We can take some comfort from the knowledge that the markets are forward-thinking, projects need to be delivered, and companies recruit people for the future.

The UK’s ever-changing political landscape had a negative impact on hiring in Q3 and Q4 of 2022, but there seems to be some government stability for now. This should help businesses to plan for the future - knowing there won’t be a change in Prime Minister or another mini budget catastrophe anytime soon. Intervention in the recent banking collapses has also helped to curb uncertainty, and hopefully, central banks can help tame inflation without causing more financial turmoil. Hopefully, interest rates will level off shortly, and signs that inflation could be closer to 2% by the end of the year should breed some confidence in the City of London.?Last year really was a year of two halves, with H1 being a record six months for hiring and then things slowing down as we were hit by one thing after another from around July onwards. We appear to be in the midst of a hiring backlog, so I am hoping for the reverse model in 2023 and things picking up significantly from around the middle of this year or even sooner.