Bloomberg News

U.K. Finance Industry to Cut 43,000 Jobs, CBI Survey Says

January 21, 2013

U.K. Finance Industry to Lose 43,000 Jobs, CBI Survey Says

Workers walk through the One New Change shopping mall in front of St. Paul's Cathedral in London. Photographer: Simon Dawson/Bloomberg

The U.K.’s financial industry will lose 43,000 jobs in six months, according to a forecast from the Confederation of British Industry, as companies shrink and reduce costs.

Banks (F3BANKS), insurers, asset managers and other finance firms probably cut 25,000 positions in the last three months of 2012 and may eliminate 18,000 jobs in the first quarter of this year, according to a study by Britain’s biggest business lobby group and PricewaterhouseCoopers LLP, published today.

Global cuts at financial firms have exceeded 115,000 since 2012 as they seek to control compensation expenses and retreat from capital-intensive businesses, according to data compiled by Bloomberg. Morgan Stanley, with securities operations in London, plans to eliminate about 1,600 jobs from its investment bank and support staff in the coming weeks, a person with direct knowledge of the matter said on Jan 9. New York-based Citigroup Inc. said in December that it will cut more than 11,000 jobs and pull back from some emerging markets to curb costs.

“What you’re seeing is exiting of certain product lines, geographies or restructuring their activities, on the other end you have demands on them for regulation,” said Kevin Burrowes, U.K. financial-services leader at PwC.

Tougher Requirements

Tougher capital requirements mean banks such as Zurich- based UBS AG are shrinking risk-weighted assets at their securities units. HSBC Holdings Plc (HSBA), Europe’s biggest bank, has sold businesses to improve profitability and Barclays Plc (BARC) said it may trim operations that don’t return enough profit or harm its reputation.

The CBI’s forecast compares with its October estimate for third-quarter job losses of 9,000.

In the fourth quarter, “numbers employed fell for the third consecutive quarter, with the rate of decline picking up once again,” the CBI said in the report today. “Staff turnover increased more strongly than expected and than in the prior quarter, while staff costs as a proportion of total costs fell and are expected to contract at a faster pace next quarter.”

The cuts in the U.K. industry will mean about 132,000 financial-services jobs have been lost since the peak in the final quarter of 2008, when it employed about 1 million people, the CBI said.

Shunning Finance

In addition to firings, bankers have been retiring earlier and younger would-be recruits are shunning finance for less- tainted industries, said Burrowes.

For young professionals, “it’s not an attractive place to go,” he said. Banking and capital markets at his firm, PwC, “is not a sector they’re attracted to any longer,” Burrowes said. “It used to be our most popular sector.”

The survey found 25 percent of firms saw sales rise in the three months to December and 30 percent recorded a fall. The CBI questioned 94 banks, insurers, customer-owned lenders, investment managers and securities firms from Nov. 19 to Dec. 6.

Separately, vacancies in London’s main financial district, known as the City, and elsewhere in the British capital fell 36 percent to 1,323 in December from 2,079 in the month-earlier period, recruitment consultant Morgan McKinley said in a statement today.

“Hiring was postponed at the end of 2012 so that headcount could fall into the new calendar year,” Hakan Enver, operations director at Morgan McKinley Financial Services, said in an e- mail. “Based on this, we also anticipate that job volumes will rise in January 2013 and then level out over the remainder of quarter one.”

The cuts come as securities firms with employees in London and New York pay bonuses to bankers for the 2012 year. More than half of financial-services professionals surveyed by Morgan McKinley said they expect their base salaries to be unchanged in 2013.

The responses are comparable to last year’s survey “suggesting that economic instability and performance challenges faced by many organizations in 2012 will see compensation remaining similarly restrained over the course of this year,” Enver said.

Meanwhile, recruitment company Astbury Marsden said in a separate survey the proportion of workers not expecting a bonus this year has doubled to 22 percent, citing increasing regulation of discretionary payouts. Managing directors expect to receive the largest bonuses, at 88 percent of their income, the survey found.

-- Editors: Jon Menon, Steve Bailey

To contact the reporter on this story: Howard Mustoe in London at hmustoe@bloomberg.net. Ambereen Choudhury in London at achoudhury@bloomberg.net

To contact the editor responsible for this story: Edward Evans at eevans3@bloomberg.net


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