UK financial services remain resilient to Brexit woes

ANDY JALIL -

andyjalil@aol.com -

While the political upheaval continues unabated in Britain, with Prime Minister Theresa May’s draft agreement with the EU failing to appease so many of her ministers and parliamentarians in her Tory party as well as the oppositions, the looming shadow of Brexit is hard to shake off and financial services, like most UK businesses, doesn’t like uncertainty.

But despite the doom and gloom with jobs disappearing in this part of the financial sector, surprisingly perhaps, there emerges a slightly different picture.

The Chartered Institute for Securities and Investment (CISI) is the professional body for those working in the wealth, capital markets and financial planning professions. It provides entry-level qualifications which are a useful hard indicator for the numbers of new staff entering the UK financial services profession, which in itself is a useful barometer of its current health and confidence.

Figures for the new CISI qualifications taken in the last 12 months to October 31, 2018 show that these sectors of the UK financial services profession have recovered strongly from its low point in March 2017. Data to October 2018 indicates that this profession has expanded significantly and is now at its highest level since April 2015 and the second highest level for well over five years.

Just prior to and immediately following the Brexit vote, we saw firms significantly reduce their recruitment programme by 15 per cent or over 4,000 jobs. Over the last two years, as confidence has returned, business has expanded, more staff have been hired and there has been an increase in demand for entry level qualifications in every month since March 2017.

It is likely that there was a small increase in examinations as firms prepared to become Markets in Financial Instruments Directive (MiFID) compliant, however this probably reduced the severity of the fall rather than accounts for the recovery, as firms needed to be compliant by the start of MiFID (i.e. January 2018) and therefore needed to ensure that their staff met the requirements by then.

The scale of the surge in recruitment suggests that the profession is surprisingly resilient given that many firms have been activating contingency plans in case of a hard Brexit — which cannot be totally ruled out even at this stage while the Prime Minister’s draft agreement with the EU is under some consideration — and some are opening small satellite offices in other European jurisdictions.

It is also notable that during 2018 there has been a significant acceleration in the number of people taking the Institute’s qualifications, suggesting that firms made a conscious decision to expand in the year, having scaled back hiring in 2017.

Whether this optimism will continue into 2019 is less clear, but the Institute’s research among wealth and financial management firms suggests that domestic demand remains buoyant, and that a number of organisations who are opening offices in the EU to secure their firms financial passport are doing so with as few people as possible, partly because the UK in general, and London in particular, remains a highly attractive place to live and people don’t want to move.

While some division remains in the opinions of companies in the financial district (known as the ‘City’) on the draft agreement between the UK and the EU, by and large, City organisations welcomed the agreement as an important step forward in Brexit negotiations.

Policy chairman at the City of London Corporation, Catherine McGuinness said the draft was a “significant step towards a deal being finalised.”

“The proposed framework for the future relationship provides welcome clarity and offers a foundation for financial services,” she said. McGuinness welcomed the proposed transition agreement that would give time for the City to “work through this complex process”, but called for more clarity on the future of EU nationals, who make up a fifth of the financial district’s workforce.

Chief executive of TheCityUK, Miles Celic, welcomed the agreement’s recognition of the value of the financial services sector. “The importance of financial services has been acknowledged and its inclusion in the political declaration means that the sector is hardwired into the future negotiations. It also recognises that this is in the mutual economic interests of both sides and — most importantly — of customers.” Director General of the Institute of Directors, Stephen Martin, called on politicians to support the agreement, to avoid a no-deal Brexit. (The author is our foreign correspondent based in the UK. He can be reached at andyjalil@aol.com)