I’ve recently been thinking about headcount cuts.
It’s always hard …
And it's getting harder.
For example, I wrote in August that thousands of bank jobs were being cut, adding up to an expectation of 15,000 City jobs this year.
Each job loss represents a significant loss to the economy, especially those in the City:
“Based upon an average salary of £150,000 and income tax of 50 percent, employer national insurance of 2 percent and employee national insurance of 2 percent, this works out at an average lost tax income per lost City job of £81,000 per year, or a total loss of about £1.3 billion in tax revenue. To put this into context, financial services workers paid a total of £18 billion income tax for the tax year 2009/10, or 15 percent of the UK total, so this year's redundancies alone could lower the sector's income tax contribution by about 7 percent.”
In fact, every bank is cutting … how far could it go?
According to one leading light in the City, Mary Caroline Tillman – shortlisted for Woman of the Year, Head of the Global Financial Practice with headhunter firm Egon Zehnder, and formerly Managing Director and Chief Operating Officer of JP Morgan's European Advisory Business – the losses will rise to around 40% of all City jobs.
In an interview over the weekend with the Independent, Mary said the following:
“The Masters of the Universe are facing a really tough time. The shake-out is only just beginning after the crash. There is a big consolidation still to come, which means there will be far fewer banks; a 40 per cent cut in jobs will be the 'new normal'. This is because of the tougher regulatory environment.”
A 40% job loss in the City would spell disaster.
For example, the article reckons that there are about 360,000 people working in the City and some 670,000 in New York's securities industry (this does not take into account all the ancillary and related services from accountants and lawyers to bar staff and restaurants).
If 40% disappeared in London, based upon my earlier calculations, which would be 150,000+ job losses. A loss of around £13-£15 billion a year in tax revenue … or more.
I wonder whether the government really wants this scenario therefore, and the Occupy Wall Street brethren.
Meanwhile, as the industry does go through its transformation from reckless risk to wrestled risk, it was interesting to see the change Mary sees happening in the core investment community of London.
“The restructuring means a different kind of leader is emerging. They are coming from the more functional areas. You can see that, with risk officers such as Robert Le Blanc at Barclays and Marc Moses at HSBC, who are now at the top … Boards want the finance guys, accountants, risk specialists, those with knowledge of IT and compliance. These are the future Masters of the Universe … and these new bankers are determined to show that banking can be a decent and good business.”