In the days before today’s UK election results and ejection of the first ever British prime minister with a previous career at Goldman Sachs, there was a waft of excitement around London banking jobs.
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Bloomberg reported earlier this week that Shore Capital has hired five bankers in the expectation of a rebound in IPOs. – William Marshall from Houlihan Lokey, Simon Bond a former Redburn Partner, Gillian Martin from Berenberg, Ben-Ralph Davies from Winterflood and James Hosie from Barclays are all joining. Their transplantation followed the revelation that the newly fused Panmure Liberum is adding new private capital and debt advisory units.
Now that the UK has a government that marks a “return to decency”, there’s hope that things might pick up even more. David Postings, chief executive of UK Finance, is onboard with the optimism. “Labour have described financial services as one of the UK’s greatest success stories and said they will champion the sector,” Postings enthused today.
Why Labour’s plans for banking and financial services look good
Labour itself has been saying all the right things. Its manifesto “Plan for Financial Services” makes promising declarations like, “Growth in the financial services sector is growth for the whole economy. The financial services sector provides £100 billion in tax revenue, and employs over 1 million workers.”
The manifesto plan also promises the creation of “regional financial centres”, “streamlining the regulatory rulebook,” “making the UK a global hub for green finance activity,” “becoming a global leader for the use of AI in FS,” “reinvigorating capital markets,” and increasing institutional investment in venture capital along with investment in green industries and infrastructure.
The London School of Economics notes that a “National Wealth Fund” will be created. This will be a “policy bank”capitalised with £7.3bn to invest in ports, “giga-factories|, the steel industry, carbon capture and hydrogen.
After a 73% year-on-year increase in UK M&A activity in the first six months of the year and with even Peel Hunt sounding optimistic about an IPO recovery in early June, the hope is that UK financial services hiring might now revive. Under the previous Labour government, financial services’ contribution to GDP went from 6.5% to 9%. Nick Dunbar thinks Barclays, in particular, could benefit from a more friendly governmental approach.
Why Labour’s plans for banking and financial services are unlikely to change much
Not everyone is quite so positive, though. William Wright, managing director of think-tank New Financial, suggests that the Starmer government is the continuity candidate: capital markets and pension reforms already underway will simply continue. Another senior banker agrees that the new government is unlikely to make much difference to London firms’ enthusiasm to hire.
This is not 1997. Deutsche Bank’s UK economists observe that Keir Starmer is not in a position to unleash the kind of “very positive UK market (FX, bonds, stocks) reaction within hours of taking office,” that Gordon Brown achieved by giving the Bank of England independence over monetary policy.
Instead, the biggest impact on UK banking jobs from Keir Starmer’s government may be the broader perception of competence and continuity. As Paras Anand, chief investment officer at Artemis Investment Management, notes, amidst the political uncertainty in France and the US, the UK has the potential to go from being, “a poster child for political instability and volatility around economic strategy,” to becoming “a bastion of relative stability.” Sterling and UK assets could recover as a result.
Coupled with what Deutsche Bank’s economists are predicting will be four quarter point rate cuts before the end of the year (subject to the new government’s fiscal neutrality), it’s this stability more than anything else that could help encourage banks to hire in London – particularly amidst concern in Paris.
However, it’s also worth remembering that recovering UK asset prices may not be a straight positive for UK banking jobs. In the first six months of the year, the London Stock Exchange Group said 73% of UK target M&A involved a foreign buyer; if the pound recovers, those buyers could find UK companies a lot less appealing.
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