We knew it was coming. Following very swiftly on from last week's suggestion that City jobs are being decimated, think tank the CEBR has issued its standard follow-up: bonuses are being decimated too.
None of this is particularly new - the CEBR predicted bonus disaster in London back in May, so this is merely updating its previous position.
So, how bad is bad? The chart below shows the CEBR's predicted evolution of City bonuses per head: it thinks they're in freefall and will reach a new low of around £5k in 2014. There they will remain. For the 2012/2013 bonus year, the CEBR is predicting £6.7k a head - down 62% on last year.
How accurate and realistic is this? The CEBR is a well-respected pundit, but it's worth pointing out that its bonus predictions (which are based on survey data from at least 20 banks, anecdotal evidence, and a study of ONS figures) can sometimes seem a little fatuous. Last year, for example, it predicted that the City bonus pool would fall 35%. However, subsequent figures from the Office of National Statistics suggested that bonuses across the UK financial services industry fell only 9%. Similarly, many banks have actually slightly increased total compensation per head on a global basis this year. Has the London bonus pool really been cut by more than 60%? Maybe not.
The CEBR hasn't restricted its analysis to jobs and pay in London. It's also looked at jobs in New York, Singapore, and Hong Kong.
As the chart below shows, the CEBR thinks jobs in London are declining to a new low level - below both New York and Hong Kong. On the other hand, it thinks that jobs in Hong Kong and Singapore are rising.
While this doomy-prediction for London seems apt in light of HSBC's repeated threats to move its head office to Hong Kong, it's also worth questioning. Goldman Sachs has just committed to a giant new office in London. JPMorgan's recently moved into a new EMEA headquarters in the old Lehman building. Jobs are going at Nomura and UBS, but is London really losing its grip to the extent the CEBR suggests?
Similarly, are jobs in Singapore and Hong Kong really set for perpetual growth? Singapore is experiencing problems of its own as banks like Credit Suisse relocate jobs out of the island and into cheaper locations like India and Poland. Similarly, a quick look at banks' quarterly reports suggests Asia isn't quite the investment banking revenue driver it's supposed to be. Are banks really going to keep adding headcount in a region where margins appear slim and revenues are in decline? Maybe not.
In the event that the CEBR is right, there's always Shanghai. The Chinese city will reportedly need 400,000 financial services professionals if it wants to fulfill its aspirations of becoming a major financial centre, but it's only able to provide 240,000 of them itself.
So, are there going to be 160,000 new jobs in Shanghai for displaced western investment bankers?
No. As our Asian editor points out, there are only 1,400 Westerners working in financial services in Shanghai right now. This is unlikely to change quickly.
However, there will be some opportunities in Shanghai.
'Product-development, finance, risk, IT, M&A, and management roles are among those that will open up for overseas professionals – including people who don’t speak Mandarin – over the next five years," writes our editor in Asia.
The Shanghai Financial Association (SFA) has produced a long list of sought-after skills. These include: product development and investment, investment banking management, development and trading of financial derivatives, risk management, quantitative investment and trading, asset management, financial engineering, research and analysis, financial management, and IT.
Simon Lance, regional director, China, Hays, believes that international expansion means Chinese banks will need to staff their Shanghai offices with more managers who have overseas experience. “Commodities traders will be in demand as China gains more exposure to international trade,” he explains. “Credit risk is another hot area where we will see demand for experienced talent as banks need to manage risk in foreign markets. Treasury, FX and fixed income will also grow.”
Many of these internationally-inspired jobs will be filled by Chinese returnees and foreign nationals who speak Mandarin, but Westerners will also be considered. Lance reckons they will be especially sought after for technical roles – such as in finance, IT, and business intelligence – that don’t involve close interaction with Chinese customers. Cross-border M&A is a client-facing exception. “This involves talking to clients in several countries, and English is the business language of choice.”
To read the complete article about moving to Shanghai as a Westerner, click here.