Reasons for Optimism: An Overview of the Financial Services Projects and Change Market in 2023 and Predictions for 2024

Can you believe we have broken the back of February already? Time shouldn’t fly when inflation is sticky, interest rates are high, and we’ve entered into a recession.

Job numbers were significantly down in 2023 from 2022

I want you to cast your minds back to 2022. In the first half of the year, the jobs landscape was flourishing, records were being broken and it was realistic for expectations to be high. However, as we entered into Q3 and Q4 we witnessed a significant 50% drop in new job openings compared to the preceding two quarters.

The pace of activity slowed down from the summer of 2022 to the new year in 2023 but by January, and for most of February, a new chapter began. There was an abundance of new roles and reworks, painting a picture of resilience and adaptability. This surge signalled that our hiring managers not only had needs but also the budgets to back them. A clear and optimistic indication that despite the economic challenges, there was an unwavering commitment to growth.

The mini-banking crisis

However, the financial landscape then encountered a seismic event, triggered by Silicon Valley Bank and compounded by Credit Suisse, sending shockwaves throughout the industry. Despite the intervention of UBS and HSBC, memories of the 2008 financial crisis and Lehman Brothers' market-shaking domino effect haunted banks. The industry held its breath, causing a temporary standstill, marked by hiring freezes, predominantly on the permanent side, and in some cases, affecting contract positions as well.

Although the market briefly revived in June and July, the post-summer resurgence wasn’t as strong as predicted. Instead, a sense of caution lingered, prompting companies to operate within existing capacities rather than engaging in new hires. This cautious approach led to a notable decline in opportunities, with job numbers in Q4 plummeting by a substantial 40% compared to previous quarters.

Regulatory and compliance continued to dominate the projects and change landscape

The need for professionals adept in regulatory and compliance fields continued to dominate the projects and change space last year. Regulatory Business Analysts and Project Managers, with expertise in MiFID, EMIR, and similar front-office mandates, were in high demand due to a focus on transparency and reporting. Notably, the realm of remediation roles increased and opportunities for Business Analysts with risk systems, market risk, and risk and control experience increased. Other continued areas of regulatory focus include anti-money laundering, cyber security and cybercrime, consumer duty, PSD2, and more recently the Financial Services Markets Act.?

Companies are keen to hire but there’s been a slowdown in investment

Recruitment, as a broader process, has changed significantly since the record-breaking first half of 2022. Market uncertainties in 2023 led to conservative hiring decisions, with clients sometimes exhibiting a slower pace in interviews and feedback. Additionally, roles requiring extra levels of sign-off caused delays and budget adjustments at the eleventh hour leading to jobs being cancelled, was all too common. While the demand from hiring managers remained constant, the instability of the global economy held things back. The most challenging market is one fraught with uncertainty.

In the face of stubborn inflation, the highest interest rates in over 15 years, and the now confirmed recession, companies have exhibited hesitancy toward investing in new change programs over the past 12-18 months. The Bank of England recognises that maintaining such elevated interest rates is unsustainable and acknowledges that a decline in spending contributes to negative economic growth. Balancing these dynamics is undoubtedly a challenging juggling act for them. However, there appears to be a glimmer of hope on the horizon, suggesting that a shift in the economic landscape might soon be in sight.

Projects and Change Management Market in 2024

In the coming months, cost considerations will play a pivotal role, especially in the first half of the year, given the current high-interest rates. However, there is a sense that the worst may be behind us, with promising signs of recovery emerging. The recent inflation figures, which are lower than anticipated by the Bank of England at this point in the year, have prompted several mortgage providers to lower their rates. This reduction in borrowing costs is expected to unleash tightened purse strings, fostering economic confidence and potentially fuelling investments in change and transformation initiatives in the second half of this year and into 2025.

In this evolving landscape, technology assumes a central role, with a spotlight on cybersecurity, cloud computing, data, and artificial intelligence (AI). Forward-thinking companies recognise the necessity of investing in technology to stay competitive. They will actively seek top talent in specialised areas like AI, cloud, data science, and cybersecurity. The dominance of AI in 2023, evidenced by significant advancements across industries, has bolstered confidence in AI-driven decision-making. Looking ahead to 2024, as companies navigate this dynamic terrain, those who invest wisely in technology and talent are poised to not only survive but thrive in the evolving market.

Digital

In times of economic hardship, digital becomes essential for businesses and people, leading to an anticipated surge in investment in this area across all industries this year. Generative AI is poised to emerge as a notable digital trend in 2024, enabling organisations to connect with new audiences, generate more content, and discover new opportunities. One prominent application of generative AI will be seen in the widespread use of chatbots, as customers increasingly engage with banking apps, online financial services, and customer support platforms. Innovations such as personalised financial planning and customized investment strategies, leveraging customer profiles and behavioural data, will be facilitated by generative models akin to those behind ChatGPT.

Importance of Regulation

Regulatory matters will continue to be a focal point, showing no signs of diminishing importance. Amidst the expanding array of regulations, cybercrime and fraud will persist as significant concerns, and heightened scrutiny is expected for digital assets and cryptocurrencies in the coming year. A notable development on the horizon is the scheduled implementation of Basel IV in January 2025, potentially emphasising the demand for change candidates with expertise in capital and liquidity. Notably, the Financial Services and Markets Act 2003 (FSMA) is expected to take centre stage, representing a pivotal departure from EU rules and influencing various sectors within financial services, including banking, markets, insurance, and funds. Roles in this regulatory space began to emerge towards the latter part of 2023, indicating a trend that is anticipated to persist throughout 2024.

Sustainable Finance and ESG

While sustainability took a backseat amidst the multitude of challenges businesses faced last year, it never truly faded away. We anticipate a resurgence in organisations prioritising sustainability and Environmental, Social, and Governance (ESG) factors in their decision-making processes. This renewed focus translates into increased support for investments in green initiatives, encompassing renewable energy, recycling, and carbon footprint reduction.

Regulators are expected to maintain a vigilant stance, scrutinising the risk management and governance practices of companies. This scrutiny aims to ensure that companies appropriately assess, mitigate, and escalate climate and sustainability risks. Consequently, we anticipate the proliferation of programs with a dedicated focus on ESG principles, as businesses navigate the imperative to integrate sustainability into their operational frameworks.

There are many reasons for optimism in 2024. Inflation has decreased, and there is anticipation of the first interest rate cut in either May or June this year. This positive outlook suggests an improved economic situation compared to the same period last year when there was so much uncertainty. While costs remain a consideration, hiring decisions on the permanent side may experience a slower pace than usual. Nevertheless, funds are expected to be allocated for investing in programs as the year progresses, providing opportunities for financial growth. Easter comes early this year at the end of March, when there is usually a slowdown, so the market should hopefully come to life in April. Is spring finally in the air?