It’s no longer ‘better the devil you know’ – Market Update May 24

Simon RoderickMarket updates

Market update - financial services - May 24 - Simon Roderick

It’s no longer ‘better the devil you know’ – Market Update May 24

May 31, 2024
It may not feel like UK financial services is in a purple patch, but the UK continues to be Europe’s most attractive location for foreign direct investment (FDI) into financial services according to EY’s Attractiveness Survey for Financial Services. Here is a round up of what we are seeing in the market.

My colleague told me she’d read that the month of May means it may rain, it may be sunny, and it may be cold, and windy. It’s technically spring, but at times it feels like autumn. It may also not feel like UK financial services is in a purple patch, but the UK continues to be Europe’s most attractive location for foreign direct investment (FDI) into financial services according to EY’s Attractiveness Survey for Financial Services. Indeed, the UK has accelerated its lead over other European markets attracting a third of all European FDI projects which is its highest market share in a decade. Both London and Edinburgh were in the top cities attracting projects, and other UK regions performed well too. This comes as no surprise to me given the amount of excellent fintechs being built outside of the capital. According to the FCA, the sector employs 1.1 million people and, alongside related professional services, contributes £100 bn in tax per year. Financial services continues to be an important asset to the U.K.

At present, I think the financial services industry (and lots of other industries too) is a bit stagnant. Whilst financial markets are improving (FTSE 100 up c. 7% YTD) and inflows growing (Mercia, UBS, Evelyn, and M&G all reporting strong inflows of late), the industry is still struggling with investors staying in cash, and with a margin squeeze. Consolidation will continue. The BVCA reported a 30% decline in investment, although this is a global, rather than UK problem. We know from our wealth & asset management clients that new pitches have been hard to come by. However, despite this, we have seen a significant upturn in capital raising hiring of late and this should translate into greater investment as sentiment continues to improve. Being optimistic, we wouldn’t be surprised to see the data improving soon. The capital raising hiring we’ve seen has been at telephone and support levels (£40K - £70k) and at Director level (c. £100K - £150K), across strategies, asset classes, and public and private markets. Much of this activity is new hires, some due to bringing capital raising in-house, and some hiring to break into new markets. During the pandemic, we understandably saw a huge shift towards telephone and video-based sales. Travelling to see one or two clients is still out of fashion, but bring people together for networking events has really taken off.

Hopefully an early election at least takes away one uncertainty. In my experience, clients are very resilient and innovative, they just need clarity on what the playing field looks like. Given the state UK Plc’s balance sheet, tax cuts look unlikely whoever gets in. However, we could really do with tax cuts to stimulate the economy and to energise the workforce and entrepreneurs. Do people think about tax when they go to work or set up a company? Well, judging by the amount of lawyers, accountants, and skilled workers moving from the UK to Dubai, people clearly do think about tax – a lot.

We’re now running just a bit ahead of last year in terms of vacancies. There are adjustments to made for the timing of holidays etc, and H1 of last year was good for us, and so it’s all about H2. I sense that the autumn last year was the culmination of lots of problems for the financial services community and so I’m very hopeful for H2 for the industry, and in turn Fram.

Candidate confidence is also returning after a period of “better the devil you know”, but there is a bit of a disconnect between candidates and clients on salary expectations. Clients naturally assume that the market is bad and therefore they can make lower than normal offers. However, top talent is often passively looking, attracted to the right opportunity, not any opportunity, and so making a lower offer doesn’t normally work out well. There are exceptions; top talent will take a cut in base salary for much improved overall comp or equity – these candidate back themselves. However, this is a rare situation normally limited to sales and front office hires. Those out of work, though, do need to be more realistic than those currently in a role. Clients often won’t offer a premium to someone who has been out of the market for some time. You can argue that it isn’t fair or right, but you can also argue that this is a market economy in operation. Therefore, if you are out of work looking for a new role, then you need to be a bit flexible. My experience is that the money follows doing a good job, and that earnings normalise quite quickly as the economy improves. The key thing is just getting back into the market.

For employers, it’s never been more important to spend time on hiring the right people – particularly at a senior level. I read with interest about the Evening Standard becoming a weekly print newspaper. It doesn’t seem too long ago that it was a daily newspaper, which the customer paid for. The world is changing fast and the ability of executives to manage a business on a day-to-day level while positioning the firm for the future is paramount. According to McKinsey, the lifespan of S&P firms is just under 18 years, which doesn’t seem long at all. Finding people with a verifiable track record, drive, and the skills to manage diverse teams and clients is key.

I hope the above is useful, but don’t hesitate to contact me or one of the Fram team if you’d like to discuss your industry in more detail.

About Fram Search

Established in 2010, Fram Search is a specialist financial services recruitment consultancy. We focus on mid-to-senior hires in the UK and internationally.

We provide high quality contingent and retained recruitment services to boutiques and global brands. We have long established relationships, outstanding market knowledge, and access to deep talent pools. Fram takes a highly consultative approach, combining outstanding tech with a human approach. We are proud that our contingent fill rate is nearly three the industry average and we augment our retained search methodology with rigorous psychometric testing. We take ESG seriously, we are champions of diversity and all staff have undertaken unconscious bias training, we also carbon offset.

Please contact us on 01525 864 372 / [email protected] to learn more.

Share this Post