Market Update - July 2022

The Reeve family have just returned from a week’s holiday in Majorca, our first since the arrival of baby Reeve last year. Although traveling abroad with a one-year-old is not quite as relaxing as before, it was such a great time away and I’ve come back the inevitable lobster shade of red.?

Also ,how can I not mention that after 56 years, FOOTBALL FINALLY CAME HOME! Huge congratulations to the Lionesses.

Included in this update?????????????????

• Key senior finance hires for July
• The soaring cost of living and it’s impact on earnings
• Vacancy and job market update
• Thoughts ahead?

Key senior hires for July

Summer holidays are upon us and as such brings the demand for extra support whilst colleagues are taking a well-earned break. Planning is important, and ensuring your department stays well-staffed during busy periods or holiday seasons can reduce burnout in the team. Over the last 4 weeks, we’ve worked on a number of interim roles and there has been a strong appetite for candidates with experience leading finance projects, transformation and system work.

We are noticing a trend in cost reduction projects for clients, likely due to the increased costs business (and employees) are facing but we’ve also spoken with several companies that are feeling the pressure from their investors (VC/PE firms) who are wanting costs cut ahead of next year. Talks of a recession and perhaps uncertain times lie ahead, so we have been engaged in hiring finance business partners, FP&A Analysts and other project specialists. The aim is to specifically look at reducing costs across the business along with streamlining systems/processes improving the overall efficiency of the business and further driving down costs.

Last month I discussed the increased demand from clients looking for candidates moving out of practice and this month see’s a continued trend and appetite for candidates looking for technical reporting roles. Financial reporting standard knowledge across FRS 102, IFRS and US GAAP has been regularly asked for from our clients as well as specific skills in adopting standards such as IFRS 9 (financial instruments), IFRS 15 (revenue recognition) and IFRS 16 (leases). If you are ACA qualified and considering moving into industry, please do reach out to me for more details on current opportunities.

The soaring cost of living and its impact on earnings

The cost of living is soaring: fuel costs and energy prices are sky high at the moment and show no sign of easing anytime soon…. even though the companies in question have recently reported HUGE PROFITS (but that’s a conversation for another time).

BUT HOW IS THIS IMPACTING SALARIES?

I’ve been asked quite a lot recently by candidates and clients how have salaries been affected this year. The data from the ONS shows that earnings growth is currently at 6.2%, BUT once you take into account inflation, the stats show real earnings have declined by 0.9%. This means that for anyone who has received a pay increase of up to 6.2%, this has not been enough to mitigate for growth in inflation. Employees will be feeling the pinch as the cost-of-living soars and may well feel the temptation to move to companies offering more attractive packages.

While we have been able to secure large pay increases for a lot of candidates this year, many of these have been candidates who have had bonuses reduced or paused or minimal salary increases.

HIGH TURNOVER CAN BE COSTLY!

Wages can be one of the largest expenses a business has and during times of uncertainly and increasing costs, I know many businesses may well want to control this through putting raises on hold or reducing the pay increases they are offering their current workforce (don’t forget anything below 6.2% is still negative in terms of real earnings!).

BUT having this approach could well be costly in the long term. Finance candidates are skilled workers and in this current market still remain in high demand and hard to come by. There are varying estimates on the cost to re-hire in finance but taking into account recruitment fees, time lost and training and onboarding it can easily be ￡25K+ depending on the level of employee. The average time to hire has increased over the last 12 months, and the impact on the wider team and business also needs to be carefully considered. People leaving can put extra pressure on the team and I’ve seen many times others also decide to leave and this can quickly change the culture of the business.

HOW CAN A BUSINESS GET IT RIGHT?

I’ve partnered with several businesses this year on improving retention and been involved in several client salary review projects. Some are looking at reviewing salaries every 6 months due to the fast-changing market. The companies that seem to be getting it right are the ones that are proactively discussing this with their employees and are showing what they are doing about it. Often it comes as part of a formal salary review and discussion but other companies have also introduced benefits platforms that offer discounts on services and additional one of payments to support with energy payments. These companies that are openly engaging with their staff about pay and the increasing costs they are facing are now seeing an increase in staff retention and a reduction in the hiring costs which they have then used to offset against other pay costs (increases/extra benefits etc).

It's not going to work for everyone and each business will have its own situation but there is certainly benefits to the more long-term, open approach over a short term cost-cutting exercise. There are plenty of options to consider, and I am more than happy to discuss this with anyone and provide salary reviews for teams free of charge.

Vacancy and job market update

Job vacancies in the UK have increased very slightly by 6,900 but are still hovering around the 1.3m mark, and this month has seen the rate of growth slowing for the 11th consecutive period with the growth rate at just 0.5% (down from 4% the previous period).

While growth rate might be slowing, the positives to take are that it’s still a record high and the most sustained period of growth since the end of 2015 (and 62.6% above pre-pandemic levels). ?

Thoughts ahead

It’s summer, the sun is shining, holidays are in full swing, and football has come home.

However, to use a famous quote: “Winter is coming, my friend”. And while for us, this doesn’t exactly mean dragons or white walkers, if you are looking for someone in senior finance to join your team this year, start planning now! Most candidates at this level are on 3 months’ notice, so even once you have secured the right person, it may still take some time before they have settled in with the team. Happy to discuss recruitment plans and timescales with anybody who is interested…. candidates too! If you want to start a role this year or even in January, feel free to get in touch with me now and we can plan ahead rather than it being a mad rush to find something in time (funnily enough quite like me on Christmas Eve dashing around to find present - I promise this is the last time I mention Winter at the start of August!)

Despite a slowdown in the rate in vacancy growth, it is still a challenging recruitment market. Candidates still have a record number of choices and I’ve been speaking to clients about how to have the best chances of securing their preferred candidate. Offering an attractive package is important, but it can’t be the only reason a candidate joins you because if that’s all a candidate is interested in; there will be another company out there willing to pay an extra ￡5-10K to tempt them away. Candidates need to be bought into a company’s mission, values and vision and we are seeing the companies that are doing this well are attracting the top talent in the market.

As we are heading into the holidays, I’ll sign off this month’s newsletter with a photo from my trip to Majorca last week. When your one-year-old wakes you up nice and early on holiday, at least you can catch the sunrise. Wishing everyone a fantastic summer whether you’re staying in the UK or traveling abroad.

Thank you for taking the time to read our market update. As always, if you would like any advice on hiring, candidates, salary benchmarking or just a general chat about the market, please get in touch.