Financial firms in London, besieged by Europe’s sovereign-debt crisis, probably will shrink their workforce this year, snapping a hiring rebound from 2008’s credit crisis as New York’s industry ekes out job growth.
Banks, insurers and other financial-services firms may eliminate about 3,000 jobs across greater London as companies in the New York region add 9,000, according to U.K.-based researcher Oxford Economics Ltd.
London’s proximity to the debt crisis is undermining the city’s efforts to gain on its trans-Atlantic rival. While Wall Street also is suffering from a global slowdown in trading and deal-making, North American banks are benefiting from a surge in consumer lending.
“Europe is still going into deeper waters, which would make London less attractive, more risky” for employers, said John A. Challenger, chief executive officer of Chicago-based Challenger, Gray & Christmas Inc., which advises firms on workforce reductions. “Momentum for the lead has turned back toward New York and the U.S.”
Reductions will be particularly acute in London’s wholesale financial-services industry, which may cut 25,200 positions this year, according to the Centre for Economics and Business Research Ltd.
HSBC Holdings Plc, Europe’s biggest bank by market value, announced plans in April to eliminate 3,167 positions in its home U.K. market, mostly in senior and middle management, under a plan to rein in costs. Frankfurt-based Deutsche Bank AG, Germany’s largest lender, said last month it will cut about 1,900 jobs, including 1,500 in its investment bank, which has operations in London and New York.
Financial-services firms and insurers in both cities had been hiring. London added about 28,000 jobs in the two years ended Dec. 31 and 13,000 more in this year’s first quarter, reaching 382,000, according to the most recent figures from the U.K.’s Office for National Statistics.
New York City gained 12,500 during those two years and 5,500 more through July, according to the New York State Department of Labor. About 446,200 people now work in the financial industry, the data show.
U.S. lenders benefited from a 125 percent jump in mortgage-banking income, which amounted to $13.7 billion in the year’s first half, according to Inside Mortgage Finance, an industry publication. Credit cards and other forms of revolving debt held by U.S. commercial banks rose 0.8 percent to $601.4 billion in July from a year earlier, Federal Reserve data show.
That belies the past year’s turmoil across the investment-banking industry, where workers typically reap the most lucrative pay packages. The trading and deals slump, as well as stiffer capital rules and limits on risk-taking, have left securities firms on both sides of the Atlantic facing questions about whether they’re locked in a so-called secular, or lasting, decline.
Average daily equity-trading on the largest U.S. exchanges has fallen 15 percent this year so far, compared with the same period in 2011. In London, the figure is down 10 percent on 2011. Pending and completed mergers and acquisitions in the nation dropped 35 percent to about $575 billion. That compares with Europe’s 21 percent slide to $505 billion.
The slowdown has prompted investment banks to pare jobs in their securities divisions. New York-based Citigroup Inc. will eliminate about 350 positions in its securities unit, people with knowledge of the plan said last month. Goldman Sachs Group Inc., which generated 58 percent of first-half revenue from sales and trading, eliminated 20 to 30 jobs in that division this week, a person briefed on the matter said.
“The bigger guys have an oversupply of people,” said Gustavo Dolfino, a former UBS AG banker who’s now CEO of WhiteRock Group LLC in New York, which advises on employment in financial services. Meantime, boutique firms and regional lenders are targeting talent in areas such as health-care, technology and energy banking, he said.
New York firms with hiring aspirations include Cantor Fitzgerald LP, which is adding 200 employees this year and may hire 800 more for its broker-dealer in coming years, CEO Shawn Matthews said in an interview in June.
Toronto-Dominion Bank, Canada’s No. 2 lender by assets, plans to add about 50 branches in New York over the next four years as part of a strategy to rank among the area’s top three lenders by number of locations. Aflac Inc., the Columbus, Georgia-based insurer with the talking-duck mascot, opened an investment-management office in Manhattan in May.
Many of the new jobs aren’t “the same type of high-level, Wall Street, get-a-Porsche-and-Ferrari-type jobs that everyone was trying to put themselves in the position to get a couple years ago,” said Adam Kahn, managing partner at Odyssey Search Partners, which recruits executives for Wall Street firms.
Some large banks are offsetting senior-staff reductions by recruiting less-expensive workers. New York-based Goldman Sachs, seeking to cut $500 million of costs, expects its workforce to feature a greater proportion of junior employees by year-end, Chief Financial Officer David A. Viniar, 57, said July 17.
“Wall Street is tilting toward younger, up-and-coming talent,” Kahn said. “Some of the folks that have a lot of experience and are paid a lot more money have been downsized in a cost-cutting effort.”
Finding a job has been toughest for people seeking middle-management positions, while lower ranks, such as associates and analysts, are faring better, WhiteRock’s Dolfino said.
London’s financial industry probably will rejoin New York’s in adding jobs next year, and growth will be about 1 percent in both places, according to Oxford Economics. London’s financial district may regain almost 1,300 jobs in 2013, CEBR said in May when releasing what it called “a sharp downward revision” to its forecast.
The change “shows how the financial crisis is hitting the City,” the firm’s CEO, Douglas McWilliams, said at the time.