The Morgan McKinley London monitor has shown the jobs marketing contracting with February seeing almost a quarter drop in City jobs available, month-on-month. While the year-on-year drop was more moderate, at 17 per cent, it’s clear the jobs market remains under stress. The company says that among the main contributors to the gloomy numbers is Article 50, set to be triggered in March. As the government continues to send inconsistent messages about what kind of deal it is seeking for British businesses, larger institutions in particular are exercising hiring caution.
“Brexit has pushed institutions into two camps,” said Hakan Enver, operations director, Morgan McKinley Financial Services. “On one side we’ve got the ‘business as usual’ team, and on the other we have the institutions that are tired of the government’s hemming and hawing and have already begun to move jobs to other EU countries. It’s the latter group that’s contributed to the quarter drop in jobs available.”
Large institutions are often hampered in their ability to respond swiftly to significant changes in markets and regulations, so the divide is falling largely along large vs. small institution lines. “The implementation of Brexit could take years, which is not a problem for small, nimble businesses that don’t need to forecast years out. They can adapt in real time, and cross the relocation bridge when they reach it,” said Enver. “Large institutions, however, are currently using up incredible institutional resources to project years out and plan for a future that changes from one day to the next. For many, it’s simply proving easier to get ahead of the worst case scenario and get out of London now.”
One month does not make a trend, but given the lackluster jobs year that was 2016, Enver remains pessimistic about the overall jobs trend in the current climate. “There’s a chance we’ll see a post Article 50 uptick in April, just as we did post-Brexit,” he said. “But the data suggests that Brexit has had a fundamental depressing effect on City jobs. We’ve already witnessed, what was a handful of jobs leaving, become hundreds. How long before we’re looking at losing thousands, even millions?”
In terms of job seekers, the month-on-month figures were down a more modest 12 per cent. “It’s a lower number than I expected, as candidates tend to register interest in January,” said Enver. “London is still home to the best financial services talent in the world, but if the jobs go, so will people. And when they leave, it will devastate the financial services infrastructure, costing British citizens jobs, too.”
According to 2015 CityUK data, the relocation of the financial services industry from the UK would cost the economy £176 billion a year and 2.2 million jobs. “The UK and the EU have had a rocky 44 year marriage. Now that the divorce is being finalised, both sides want the best deal for themselves, but once your household is demerged, things get complicated fast,” said Enver. “Both parties should be looking to an amicable divorce where they remain co-parents of the joint economic household that they’ve built, rather than tearing the place to shreds to prove a point.”
How divorce proceedings play out remains anyone’s guess, but others are seeking to take advantage of the turmoil. France had made fresh efforts to woo London’s lucrative financial services sector to Paris. “Paris is an irrefutably charming city, but the financial services industry depends on its ability to rapidly expand and contract in accordance with the economic climate,” says Enver. However, he argues that given the near impossibility of letting staff go under French law, not to mention the growing support for a Frexit, the response from the City so far has been less than enthusiastic.
While London’s loss is unlikely to translate to Paris’ gain, relocation is inevitable and already underway. Many US institutions seeking access to the EU’s common market set up shop in the UK due to its more business friendly regulatory system, as well as the language-barrier free working climate offered. “American banks are in the UK for the broader EU market. If Brexit cuts them off from it, they will have no incentive to stay, and will be forced to relocate,” said Enver. “For smaller European banks, access to the British market will likely be enough to retain some operations in London and other British financial services hubs such as Manchester.”