The losses from lending to
"sub-prime
" borrowers who were a poor credit risk are racking up. UBS has
declared losses of around £6.5bn, Citigroup £5.5bn and Morgan
Stanley almost £5bn. UK high-street banks are not exempt: Barclays
has written off £1.3bn, HSBC up to £3.4bn, RBS £1.25bn and Lloyds
TSB £200m. Goldman Sachs forecasts sub-prime losses for entire
financial sector at £200bn. With the financial services sector in
turmoil, what does this mean for IT staff?
Anthony Ratcliffe, director of change solutions at Investigo, an
IT recruitment consultancy that specialises in providing project
and change management staff to the financial services sector, saw a
partial recruitment freeze at the end of the summer, when the US
sub-prime market first started to show cracks. "The shutters came
down as banks took stock, and a lot of them got rid of contractors
and cut down on their spending at that point," he says. "But many
of them overshot and have had to start rehiring."
It is no surprise that the biggest slowdown is in demand for IT
staff with product knowledge in areas most directly affected by
sub-prime lending, such as asset-backed securities and the debt
market in general. However, Ratcliffe says, "the market is still
very buoyant for staff with experience in equities, commodity
trading and emerging markets." Martin Luise, managing director of
the Charles Fellowes Group, which focuses on headhunting senior
staff earning £100,000-£250,000 for a number of sectors, including
financial services, agrees that overall the slowdown in recruitment
in investment banking has been less than expected, and retail
banking is holding up well.
Moreover, Ratcliffe says, "big banks may be cutting down
significantly on spending, but they are still running IT projects.
The cost of not running those projects is greater than the cost of
running them. Also, a lot of work is the result of regulatory
changes - for instance, there is still a tail of work being spun
off from the Markets in Financial Instruments Directive - and,
credit crunch or not, that work has to happen. That means they are
still hiring."
On top of that, says Alistair Leathwood, managing director of
FreshMinds Talent, which concentrates on recruiting graduates and
interim staff for IT roles, the financial services sector is still
recruiting heavily at graduate level. "Companies are saying they
expect to be using even more IT over the next five years to help
them expand into different countries, markets and channels," he
says. Even if IT projects are cut back in the short term, he points
out, "the more entrepreneurial employers know they will need IT
people in two or three years' time. Since people in the first
couple of years of their career are relatively cheap and flexible,
the attitude is 'let's get them in now'."
Some IT staff do have reason to be concerned. "Things are
slowing at the senior level because companies are delaying some
projects for at least a couple of months, so they are not hiring as
many project managers on £100,000 a year," Leathwood says. Where
companies are hiring for these roles, Ratcliffe says, positions are
having to go up to a higher level for approval, so the recruitment
process is taking longer.
For other staff, the market is still very buoyant.
"Business-focused technologists who understand financial services
products are still very much in demand," says Ratcliffe, and Luise
says financial services companies are "still paying a premium for
solution architects and data architects." And because the skills
shortage was so acute before the credit crunch, there are still
plenty of opportunities and they are having little difficulty
finding new roles.
As a result, salaries and benefits are holding up. Ratcliffe
thinks financial services companies will look to save money
primarily by recruiting contract staff directly from recruitment
consultants and managing them themselves rather than using
consultancies to source those skills.
Yet IT staff working in the financial sector are undoubtedly
worried. Luise says this nervousness is manifesting itself in two
ways. Firstly, he says, "although many would prefer to stay with
their current employers, they are becoming more willing to take
calls from headhunters and explore their options." Secondly, he
says, "candidates who have traditionally taken permanent roles are
now more willing to consider contract opportunities because they
are worried they will not get another permanent position as quickly
as they would have done a year ago." Leathwood says that candidates
are also getting out of previously "sexy" areas, such as working
for smaller private equity houses, into roles in large banks
catering to many market sectors, which are seen as offering great
job security.
Luise is also seeing candidates who have spent their whole
career in financial services looking to transfer their skills into
other sectors because of the bad press and negative reputation
financial services has gained recently. "Some are looking at moving
into consultancies that serve not only financial services but also
other sectors, as a way to maintain their salary but gain
experience in different industries," he says. "Others are
considering utilities which, like banks, are subject to complex
regulation and run large systems with a strong focus on customer
transactions. A third area is telcos, which offer the same kind of
fast-paced environment found in financial services."
What is clear is that the financial services sector will remain
jumpy throughout the first half of 2007, as the full impact of the
sub-prime slump becomes clear. "People just don't know what nasty
surprises are on the way, so the attitude at the moment is very
much about being prudent," Ratcliffe says.