Two years have passed since the world’s economic output reached its low-point. It was predicted by one of the UK’s largest banks at the height of the crunch that “it would not be until early 2011 that any sign of (economic) recovery would take place”.
However, the former Prime Minister Gordon Brown commented this week: “I sense that in the first few months of 2011 we will have a major crisis in the Euro area”. With this growing pessimism, it appears that 2011 could still be a challenging year for the banking market.
The support of “Europe’s failing economies” presents a potentially huge problem to the banking sector on several fronts. Eurozone banks have lent great financial support to ‘prop-up’ the financially weaker economies. This unsecured lending has once again greatly over-exposed many of the large European banks, at a time when there is a growing scramble to comply with stricter capital requirements.
We can only make a calculated guess, based on patterns that emerged from the global credit crunch, as to what effect the Eurozone crisis will have in recruitment terms. Considering the crunch was centred on the financial markets, it wasn’t by any stretch the financial sector that ultimately felt the hit the worst. The jobs lost in finance were around 8% – relatively low compared to jobs lost in construction and manufacturing, which were down 27% and 17% respectively.
Gordon Brown has recently supported this prediction by suggesting that a failing Eurozone would have a wider effect than just on the banks, predicting a long-term crisis could create “an unnecessary and avoidable period of low growth and high unemployment, and diminishing living standards”.
There is also a question mark over the expansion plans of Eurozone banks, which now might be more reluctant to take any risks. The problem in particular is that “Europe has lost ground to both the US and Asia”. Therefore the risk, with stricter Visa requirements coming into force, is that Europe will no longer be the destination of choice for highly-skilled migrants, with the continent losing candidates to the US and Asia, whose economies, for now, look more stable.
The Nationalised Irish Banks have been the subject of immediate focus the last month, although from looking at the likes of RBS and Lloyds it cannot be said that nationalisation has caused a negative impact on the recruitment needs of some of the largest Nationalised European banks. Indeed, it may be the case that any nationalised Eurozone banks are forced to increase recruitment amid restructuring plans. However, with Lord Turner commenting that the FSA may claw back the pay of failed banks bosses, it creates a danger that there may be a reluctance to take roles at the highest level of financial organisations, or indeed create a culture of over cautious decision makers that weaken the long-term competitiveness of companies in fear of taking a risk too far.
For 2011 to remain the year of recovery ultimately relies on a speedy resolution of the Eurozone crisis.
Consultant Sam Price currently works on the Banking and Capital Markets Contract Team at Marks Sattin. He places both part qualified and qualified accountants in contract positions across financial services, working with major and mid-tier investment and retail banks.