Key parts of the financial services sector such as banks and fund managers have started hiring again as the flow of jobs from the sector slows to a trickle.
A survey by the Confederation of British Industry and accountant PricewaterhouseCoopers published today shows that around 5000 jobs were cut by UK financial services firms in the last three months of 2009. Around the same number of jobs are expected to go in the first quarter of 2010. This takes the total lost from the sector to around 70,000 since late 2007, from a workforce of aroundone million.
Within this banking and investment management firms, both important employers in Scotland, have begun hiring again. This is the first increase in employment in the banking sector for two years and firms in both sectors expect to continue hiring in the current quarter.
PWC UK banking leader John Hitchins said: “I think it is the fact that they (banks) feel longer-term optimism about having weathered the worst of the storm and they are beginning to recover again in some areas.
“There has been a noticeable upturn in recruitment in some of the fixed income trading areas because some of these areas had a good 2009.”
Activity in the financial services sector increased slightly over the last three months of 2009, as the rally of the previous quarter continued.
However, growth was less than expected and firms expect volumes of business to decline in the current quarter, the CBI/PWC financial services survey showed.
This means that despite continuing cost reductions and a favourable spread, firms do not expect profitability to grow over the next few months.
Hitchins conceded that in banking the short term outlook is “less encouraging”.
“Activity and revenues are expected to decline over the coming quarter, predictions for demand remain weak and an uncertain regulatory future continues to temper the banks’ growing confidence with caution,” he said.
Pars Purewal, PWC’s UK asset management leader, said: “Investment managers continue to take confidence from the recovery in equity markets and are enjoying a welcome period of relative stability.
“With revenues on the rise, the cost-cutting agenda which dominated the thoughts of many investment managers in early 2009 may be losing some of its impetus.
“Instead, the sector is increasingly focused on developing new products and in the short term at least, respondents are hoping to achieve organic growth through selling additional products to existing customers.”
Steve Davies, head of financial services consulting at PWC in Scotland, said: “It is probably two steps forward and one step back for Scotland’s financial services sector. The news on improved margins and cost management is tinged with a view that growth prospects are not good. The reduction in the investment and trading income that many enjoyed during 2009 is not being offset by a return to profitability of more traditional commercial and retail finance services business.
“Until we see more confidence in key indices such as house prices and unemployment, consumer sentiment will impact the business plans and investment decisions for many companies.”
