2017 has seen significant changes in the dynamics behind the hiring picture in London. At the forefront is an improvement in profits and business optimism for many of the key (particularly US) players. This has led to some long-overdue, serious commitment to strategic technology investment, and an increase in urgency and prioritisation of the various regulatory obligations affecting the industry.
The chief consequences of this are:
- a significant increase in overall hiring volumes
- a more even balance of contract:perm hiring ratios
- upwards pressure on salaries/rates across many disciplines
There does, however, remain a proportion of organisations, particularly in London, for whom hiring remains at very low volumes, due to location strategy, or because business priorities are focused away from the London markets. More than ever there is clear polarisation between those firms and business areas committed to London hiring and those which aren’t.
Which areas are busy?
Many of the key players’ multi-year initiatives to identify priority business areas and revenue streams and to restructure accordingly, are nearing completion. With revenues and share- prices mostly heading in the right direction, we’ve seen the first widespread investment in new technology platforms since 2012. In recent years we saw one or two firms commit to serious technology spend, but we now see the majority in the market for it, in their priority areas.
2017 has seen significant spend on next-generationplatformsincluding– but not limited to: algo trading, consolidatedintra-dayrisk,enhanced STP, consolidated regulatory reporting,salesandresearch/CRM systems and ongoing investment in digitalisation and central data functions. We are also aware of significant investment in innovative technologies/concepts such as blockchain, AI/machine learning, quantum computing/HPC, though much of the staffing and detail for this has been kept in-house.
Ultimately, however, the hiring surge we’ve witnessed derives primarily from regulatory pressure. With MiFID II amongst other obligations looming, most of the key players have been forced to come to market – whether for technology or business change – to ensure deadlines are hit, or to derive maximum competitive advantage from any regulatory-driven strategic solutions. The bulk of this hiring is, of course, in the regulatory SME or programme (eg ring-fencing) delivery space.
- Significant increase in hiring activity
- More permanent head- count and exec-level changes
- Brexit location strategy high on the agenda
- Big Data programmes continue to grow
- Regulatory projects and hiring stabilising but still in demand
Key hiring observations
As an agency, we’ve seen demand for hiring increase very significantly. Whether this is truly reflective of client demand, or partially as a result of the direct-recruitment talent pool being squeezed, is difficult to say. What we have certainly seen, however, is a contract:perm hiring ratio of 90:10 in 2016 moving to almost exactly 50:50 in 2017, driven by the aforementioned growth in strategic technology investment.
The contract market has, though, remained relatively strong – driven largely by regulatory projects, though many firms have also focused on the contract market for their software development needs, often because of caps on/reluctance to increase permanent London head-count.
We’ve also seen evidence of London regaining favour as a location for certain teams/banks over previously- explored nearshore/offshore options. It can only help that London headcount is now effectively 20% cheaper than 12 months ago for foreign owned banks.
In terms of remuneration, the trend is generally upwards. Bonus levels vary widely between institutions, business-areas and key staff, although there is a clear upswing in fixed-compensation components in general. This increase is partially down to some banks realigning their fixed/variable comp ratios (particularly below director level), but increased demand for talent has to be a key driver. Contract rates have also increased month-on- month, with considerable growth in experienced development talent (Java, Scala, C# for example) and some exceptional escalation in rates for MiFID II SMEs and programme delivery experts.
The above factors have also driven increased movement at the management layer with some very significant departures (and hires) of D and MD level staff. Recent years have seen a build-up of senior staff ‘open to offers’, but it’s only recently that suitably attractive propositions have appeared in any great number. The polarisation in ambition between organisations/business-lines detailed above has only served to accelerate decision-making and exits.
While location strategy – in terms of on/offshore – has appeared more settled than in recent years, with many offshore/nearshore (particularly development centres) solutions seemingly fixed for the time being, there have been some instances of hiring difficulties outweighing the accounting benefits of these locations and therefore a return to focusing hiring on London, particularly candidates with domain experience.
Consolidation of consultancy suppliers
Many organisations have focused on economising via increased scrutiny on ‘consultancy’ spend. Consolidation of approved consultancy/SOW suppliers has been commonplace as has an increased pressure to conform to ratecards and greater transparency of charges. This has been driven, in part, by a desire to increase the proportion of permanent staff on site due to Intellectual Property as well as cost factors. Conversely, this has been countered by a drive, in some houses, to hand over management of various downstream business and tech functions entirely to consultancies, whilst focusing hiring and variable spend on revenue- generating functions.
With more maturity in the market, we’re seeing key firms emerging in specific sectors, and more collaboration with the banks, with several joint venture programmes emerging. Funding appears to be focused on the more established players, with blockchain, payments and lending still the key sectors.
Challenger banks are gaining traction, particularly with the forthcoming introduction of OpenAPIs which will potentially have a big impact in the market for online banking products and services.
Cyber security is a major issue, with ongoing, well-published threats from individuals, nations and terrorist groups. While most of the expertise lies within the specialist security software and consultancy firms, we’ve seen significant uptick in demand for senior project staff to put in place processes and policies. The demand is mainly from outside of financial markets, often looking at the talent from the large internet- based retailers.
Big Data has continued to grab the headlines. In the past year, we’ve seen genuine investment in the adoption of the underpinning technology to capitalise on the business insight, its use, reporting, and gains that can be made across the full lifecycle.
The number of ‘data lake’ programmes has risen, with budget being thrown at data analytics tools and their direct commercial use. Demand for Hadoop, Cassandra, MongoDB, Cloudera, for example, continues to grow.
There continues to be a lot of noise around blockchain, with most firms investigating projects and joint ventures in some shape or form. The drive to be an early adopter of the technology is paramount with the ability to monetize the benefits by reducing cost and offering the service before competitors. There is a lot of hype, but blockchain is here to stay. While its potential to transform various areas of financial services is not in dispute, we are yet to see significant delivery projects or hiring that is directly related to blockchain, but we expect this to change.
BNY Mellon recently hired Alex Batlin from UBS to lead the newly formed Emerging Business & Technology team, which has a remit to investigate disruptive, emerging technologies and define strategies. Their primary focus is on DLT (Distributed Ledger Technology). The cost-savings provided by a DLT solution could be significant in the pricing of their transaction banking services.
As with blockchain technologies most of our clients are talking about machine/AI learning. Some firms are only at the strategic research stage while some are building out AI solutions, embedding some form of machine learning into applications. Many of these are customer-facing applications in the retail banking space, using learning assistants and predictive analytics to support clients. Machine learning in the capital markets isn’t new, but the technology is advancing quickly and we are seeing interest in talent from some of the big corporates such as IBM and Apple who are deploying AI into their software.
Key trends in Q1/Q2:
- SME BAs (regulatory, MiFID II)
- Data analysts / architects
- Senior change / IT programme managers
- Software engineers / UI developers
- Apache tool set
- Regulation / MiFID II / ring-fencing
- Big Data / Data Science
- Digital transformation
- Cyber security
- Corporate actions / asset servicing