It’s a very challenging jobs climate due to Brexit, spectre of trade wars in multiple regions, paired with a political climate that rewards antagonism over collaboration and the promise of rising interest rates plus the IR35 rulings
With no summer uptick in jobs to boost the market going into autumn, the October jobs landscape was an austere one. Jobs decreased by 7% month-on-month, and by an aggressive 33% year-on-year. Traditionally, this is the time of year that institutions slow down their hiring until after the new year, making for a potential drop in hiring for the remainder of 2018.
Though many organisations are being tight-lipped about their post-Brexit staffing plans, it is evident that we are now too close to the March deadline for institutions to want to aggressively beef up London staff. “Brexit’s grip on jobs feels permanent, but one way or the other, the fever will break in the coming months”, said Hakan Enver, Managing Director, Morgan McKinley Financial Services. “The question now is how deep a hole will we have to climb our way out of come March?”
The reticence of employers to discuss their hiring plans is causing professionals to seek out new opportunities at an accelerated rate. “Businesses are holding their cards close to their chests, prepared to hold off on announcements until the very last minute, and that’s worrying their staff”, said Enver. “Professionals who want to stay in London, but are concerned about their roles being transferred overseas, are leveraging the shrinking window of time to try and secure a job locally. This is shown in the 26% increase in professionals seeking jobs compared to the prior month”, added Enver.
Brexit takes a bite out of business investments
A new CBI business-leader survey released in October found that four out of five firms reported Brexit as having already hurt their investment plans, adding that they would implement “damaging” contingency plans if they cannot get more clarity on the terms of the UK’s departure from the EU. “There’s no way to fully quantify the loss in investments that have taken place during the last two years. But you can draw a straight line from those withheld investments and the 33% decline in jobs from one year ago”, said Enver.
More than 70 business leaders have signed a letter calling for a public vote on the terms of the UK’s Brexit deal. “The business community was promised that, if the country voted to leave, there would continue to be frictionless trade with the EU and the certainty about future relations that we need to invest for the long term”, the letter said, pointing out how far a cry reality has been from this promise. “Brexit has been a series of blunders and it stands to reason, businesses want to apply pressure on the government to get the economy back on track”, said Enver.
Brexit isn’t the only culprit for the challenging jobs climate. The spectre of trade wars in multiple regions, paired with a political climate that rewards antagonism over collaboration and the promise of rising interest rates, are all adding to a climate of confusion that is impacting the hiring market. “We live in uncertain times and uncertainty has never been good for business”, said Enver.
Timing of IR35 legislation rollout brings relief, but concerns remain
Chancellor of the Exchequer Philip Hammond announced that whilst the government will introduce new rules tightening the application of IR35 legislation in the private sector, this will be effective in April 2020, rather than April 2019 as some had feared. The rules, which apply to off-payroll workers, are already in place for the public sector. “Whilst the decision to apply these rules in the private sector is not popular with business, the delay at least gives companies breathing space to prepare, though we still don’t have the answers to all the fundamental questions of how this will impact both large and medium-size companies and the self-employed contractors themselves”, said Enver.
Contractors play a key part in satisfying demand for talent from the financial services sector, and the new rules around IR35 are expected to change the contractor hiring market in significant ways. “It will complicate things, especially if the categorisation of roles as being on-payroll means legitimate contractors are forced to pay a significantly higher tax rate, or if that forces them out of the talent pool. What we saw in the public sector is that many hirers will make blanket decisions not to use Limited company contractors, even if the roles would pass the test, which severely limits the talent available to them. Part of this is a lack of confidence in the CEST test, and ambiguity over where the liabilities and responsibilities fall, and these are some of the issues that need to be resolved in the next 18 months” said Enver.
In a push for diversity and efficiency, recruitment methods get a makeover
Leading financial services organisations are signalling to recruiters and professionals that they are changing the way they recruit staff. Both PwC and KPMG have announced they will no longer accept all-male job shortlists, to ensure more pathways for women into the sector. “Finance remains a male-dominated sector, and this is a big step towards changing that”, said Enver.
Increasingly, organisations are also beginning to pare down the interview process by dropping the final interview stage for student recruitment altogether. So far, of the larger institutions, only EY and KPMG have made this change which, in the case of EY, almost halved its recruitment time, bringing it down to five weeks from application to offer. “Shaving three weeks off the time it takes to hire a recent graduate puts you miles ahead of the competition for talent recruitment”, said Enver.