The news of the 10,000 layoffs announced by UBS group has spread like a shockwave in the narrow streets of the old financial district of London. The shock was felt equally by the bankers and the constellation of companies and entrepreneurs who have become accustomed to a customer sector with deep pockets.
UBS, the largest Swiss bank, recently announced it will lay off 10,000 employees over the next three years. Among them, 3,000 of the 6,600 employees of its division in London.
The big number of layoffs announced by UBS shocked even the “veterans” of the City of London, accustomed to layoffs that occur periodically in the financial industry, writes British newspaper Financial Times Business.
Swiss bank announcement could be only the tip of the iceberg. New regulations requiring banks to build up more substantial capital reserves, difficult economic conditions, lower revenues and difficulties in the credit markets have seriously affected the profitability of certain sectors of the financial industry and, in some cases, threatened their viability, notes FT. Thus, investment banks are preparing fundamental structural changes, and many bankers do not think the management will come back and change these decisions even after the economy recovers.
Many banks have not yet shown a reaction. Head of Financial Services at PwC Consulting company London, Kevin Burrowes, commented for the Financial Times that several major banks “have not awakened yet,” they did not realize that the industry is undergoing a change of direction. “But they will have to wake up. There are banks that will have to make some very difficult decisions,” he said.
The tough impact of London’s financial industry loss
The appreciation of UBS shares after the announcement of redundancies could encourage other banks to take similar measures, triggering a new wave of layoffs. Resettlement impact of the financial industry in London is felt beyond the walls of City banks. From PR agencies, human resources and real estate brokers to tailors, jewelers and luxury florists, companies and small businesses in London’s financial district owe their well-being to a healthy financial industry.
Thus, companies who used to serve banks and bankers started to seek alternatives. Some recruitment companies specializing in bank jobs began offering personal training services and human resources consulting, according to Burrowes from PwC. Also, a florist near UBS offices introduced bouquets at lower prices to counter falling sales.
Financial and professional services industry in London is one of the main drivers of the economy in South East England. Changes in the banking sector have brought downtown London more specialists in risk, regulation and integration, but no one expects that they can compensate for the exodus of jobs in the financial industry.
According to the Center for Economic and Business Research in London, data taken by the Financial Times, the number of employees of the City of London in financial services fell from 354,000 in 2007 to 255,000 this year, the city thereby losing approximately 100,000 employees most of them highly paid.
While bank revenues dropped, it’s a delicate job for the banks to stimulate employee performance. Capping salaries and the disappearance of bonuses might cause some to seek work elsewhere, perhaps in sectors that are doing well, such as IT, or elsewhere.
Reply