In the June general election, the public sent a clear message that they oppose the hard Brexit that the government has been pursuing over the course of the last 12 months. “It took Brexit to show the British public just how much we benefit from the EU, and the buyer’s remorse is showing. Without a mandate for a hard Brexit, the government is finally being forced to compromise, which is in the best interest of all involved,” said Enver.

Even as the prospect of a softer Brexit grows more likely, the shift comes too late for some. Though the 5% increase in job seekers, month-on-month, demonstrates that professionals are regaining confidence in the financial services job market, the 49% decrease in job seekers, year-on-year, underscores the dramatic shift in the City’s workforce heralded by the vote to leave the EU.

The City’s business services sector employs over 190,000 workers, making it London’s largest employer of EU nationals. All in all, 43,000 EU nationals left Britain last year. Was the trend to continue, the region faces an additional loss of £6bn in tax revenue, annually. “It’s a fundamental failure of political leadership that so many talented professionals have stopped seeing their futures here in Britain,” said Enver.

The talent attrition is being felt by employers, also. Open University surveyed 400 British based firms of which 90% reported difficulty recruiting skilled staff since Brexit. The survey further found that the skills gap costs British businesses £2bn a year, a hefty price tag in an already uncertain economy. “It is now time for action to be taken to prevent a further brain drain of talent out of London. This situation will get worse, more and more candidates are relocating back to their home nations or alternatively making it clear to their employers that once an opportunity arises to relocate, they would like to be considered.”

Where the jobs are growing and where they’re going
Beyond the booming fintech sector, which is being driven by hiring in artificial intelligence and cyber security in response to escalating systems threats, hiring for regulatory jobs have picked up significant pace. “In response to the latest round of US banking stress tests, our clients are recruiting aggressively for people with expertise in risk management, quantitative finance and internal audit,” said Enver. “As technology and business units move beyond collaboration to full on integration, regulatory compliance and efficiencies are a top priority for institutions.”

Since Brexit, there has been an expectation of growth in the regulatory sub-sector of financial services, but the lack of clarity surrounding the UK’s divorce proceedings from the EU have forced institutions to hold back from hiring until they know what areas of expertise are required to navigate the regulatory waters. “The second the cat’s out of the bag and we know what regulatory hurdles institutions face, hiring in regulatory departments is going to skyrocket,” said Enver

Though only 2% of the City’s jobs, the announcement that 9,000 jobs will be relocated from the UK to mainland Europe stoked concerns that the worst Brexit fallout may yet lie ahead, not least of all because of the impact the loss would have on tax revenues. The exact jobs number, however, is contingent on issues such as passporting and freedom of movement, both of which remain sticking points for the business community. “The British economy is already highly dependent on the City’s contribution to government coffers, so if all 9,000 jobs are moved away, it will impact not only the banker in London, but also the police officer in Liverpool,” said Enver.

As with all things Brexit, there is no certainty surrounding whether or not jobs will be relocated, and even senior financial services titans disagree on the current state of the City: when HSBC Chairman, Douglas Flint compared London’s post-Brexit financial services sector to a Jenga tower, poised to collapse, Lloyds Banking Group chairman Lord Blackwell was quick to disagree. “At this stage it’s less like Jenga and more like a drawn out game of cricket where it’s beginning to feel like it might never end, but it will, and the City will adapt,” said Enver.

Ignore millennials at your own peril 
Millennials are aging into entry and mid-level positions, making them a central focus of hiring across the financial services sector. Despite being among the most impacted by Brexit, they were largely ignored by Tory candidates. “Millennials are integral to the future of the British workforce. We’ve already alienated countless EU nationals, we can’t well afford to alienate a generation of creative and ambitious Britons, too,” said Enver.

Indeed millennials are already pushing the City to change its standard operating procedures. Goldman Sachs has termed this the “millennial economy” and is investing considerable resources on learning how to recruit from the enigmatic generation. “It’s not an easy predicament for the City, having to adapt to rapid shifts in technology while meeting the demands of the first generation of digital natives, and all in a post-Brexit climate. But failure to attract millennials and harness their skills will be a greater threat to the Square Mile’s existence than all the regulatory hurdles Brussels can throw at us combined,” concluded Enver.

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Consumer credit ticked up by 10.5% year over year in February, slightly below the 10.9% growth recorded in November 2016, which had been the fastest rate of expansion in 11 years, according to the Bank of England. The level of competition in the segment — classified as credit card lending plus overdrafts and other personal loans — is ’robust’, and major lenders expect this to continue, according to the Bank of England’s first-quarter Credit Conditions Review.

Credit card activity at UK lenders has been on an upward trajectory since 2013, although there has been a slight decline since it peaked towards the end of 2016, according to the British Bankers’ Association.

High-quality borrowers

Certain UK lenders have seen rapid growth in credit card lending over the past year, with Virgin Money Holdings (UK) Plc growing its credit card balance to £2.4 billion at the end of 2016, an annual increase of 55%. Lloyds Banking Group Plc grew credit card loans and advances by 5% to £9.84 billion in 2016, and it is finalizing the acquisition of credit card business MBNA Ltd., which will bring £7 billion of assets when the deal closes later in the year. Barclays Plc grew credit card lending by 4% to £17.8 billion in 2016.

An increase in credit card borrowing by lenders such as Virgin Money does not necessarily imply that issuers have relaxed their lending criteria, according to Anthony Da Costa, UK banks analyst at Peel Hunt. The pool of potential borrowers with a good credit rating may have increased as a function of a strengthening economy in recent years, he said. Banks appear to be sticking to higher-quality credit card borrowers rather than trying to grow their books by venturing into the higher-risk end of the market, he added.

“Subprime is still a dirty word in the UK, and I don’t see a lot of lenders doing it,” he said in an interview. “Customers towards the subprime end of the market don’t have the level of supply of credit they had a decade ago.”

Arun Melmane, a ‎research analyst at Macquarie Securities who covers UK banks, agreed that the supply of good-quality credit card borrowers has probably increased to some extent.

“We hardly have any defaults in the UK, and for individuals, having no defaults might make your credit rating look better,” he said.

The write-off rate for consumer credit in the year to the fourth quarter of 2016 was 2%, broadly unchanged from the previous year, according to the Bank of England. Rates of impairment in the credit card portfolios of major UK lenders are also relatively low, at 3.1% for the 2016 full year at Lloyds. At Barclays, 1.9% of credit card loans are in 30-day arrears and 0.9% in 90-day arrears.

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“Employers know that Brexit is happening no matter which party wins. They’re more concerned now about whether voters will choose a pro or anti-growth platform,” said Hakan Enver, Operations Director, Morgan McKinley Financial Services. The financial services industry contributes nearly 12% of the government’s total annual tax receipts, making it a crucial component of Britain’s economy. “Brexit forced financial services institutions to draft plans for leaving the City. Draconian tax hikes at home may just force them to put those plans into action.”

An 11% year-on-year decrease in jobs is more modest than in previous months, raising hopes that the sharp year-on-year downward trend might be drawing to a close. “Employers are telling us that they’re no longer factoring Brexit into their hiring decisions,” said Enver. “They are working with what they have, not what may or may not happen in years to come.”

Professionals seeking jobs were up 14% month-on-month but down by a precipitous 42% year-on-year. “Job seekers, unlike institutions, are not waiting for election results to make their next move. They’re optimistic about the City’s jobs market,” said Enver. “The year-on-year drop in job seekers reflects the fundamental shift of the City’s job market as non-British professionals continue to either leave for more secure markets, or cling to their existing job until they get more clarity about their right to work in the UK.”

Theresa May embraces Square Mile
Since taking up residence on Downing Street, Prime Minister, Theresa May has enjoyed an at times rocky relationship with the financial services industry. May sought to put lingering concerns about her commitment to the City to rest by discussing her vision of the Square Mile, saying:“the role that the City plays in supporting [EU] economies and their businesses and also the fact that it has taken many years for the City to build up those expertise, to build up that ecosystem [and it] can’t be done by somebody else at the drop of a hat.”

In the interview, May went to great lengths to assure a wary financial services sector that she not only understands its needs, but also that she intends to fight to ensure that those needs are met, both in terms of negotiating the best possible trade deals for financial services, as well as ensuring that institutions can continue to hire the best employees irrespective of national origin.

“In speaking directly to the City of London, Theresa May showed both her deep understanding of what’s at stake for the City, as well as her commitment to protecting City jobs,” said Enver. “I think the message will go a long way to soothing anxious City nerves.”

A new report by S&P Global Ratings mirrors May’s sentiments. It projects that despite remaining Brexit uncertainty, untethering itself from the EU will open the door for more economic opportunities that are currently not open to the UK. “There is a real opening for UK business to develop closer trading relations with faster-growing non-EU economies. This will play to the British economy’s strengths, by focusing on faster-growing, technologically advanced, value-added manufacturing and services,” said the report.

London draws tech giants and venture capitalists
If London’s economic prowess is waning post-Brexit, you certainly couldn’t tell from what’s happening on the ground. Tech giant, Google announced details of its £1bn compound to be built in Kings Cross. “When you have a global tech leader like Google expand its operations, you can be guaranteed more innovation and investments will follow,” said Enver.

The sentiment is shared widely across the board. London-based venture capitalist, Eileen Burbridge called London “the place to start and grow a fintech business.” A Silicon Valley transplant, Burbridge acts as the Treasury’s fintech envoy. She predicted that cybersecurity will be the “biggest sub sector in financial services”, but does not expect fintech growth to be limited to only that sub sector.

World Bank adjusts UK’s growth forecast 
The World Bank revised its forecast for Britain’s economic growth in 2017. In January the Bank projected a growth rate of 1.2%, but has now upgraded the estimate to 1.7%. The number is roughly similar to 2016’s growth rate of 1.8%. The upgrade came as a result of increasing evidence that the British economy is withstanding Brexit uncertainty, and is well positioned to adapt to the needs of a global marketplace.

“Britain is defying the odds, thanks to an agile and robust business sector, which is all the more reason to ensure that the government puts growth and jobs at the forefront of their agenda,” concluded Enver.

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