City Jobs Market Points to "Considerable" Decline in Salary Change
- Written by: Gary Howes
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Image © Pound Sterling Live
Salaries being offered to new starters in London's financial services industry are down sharply, raising hopes that a wage-lead inflation spiral is unlikely.
According to Morgan McKinley’s 2023 London Employment Monitor, the average salary change in the London market "is dropping considerably".
The report showed a 13% average salary increase for people moving from one job to another in the second quarter of 2023, down from a peak of 25% one year ago.
"With so much rhetoric around wage inflation, there does appear to be more control from corporates in not offering exaggerated financial packages to tempt people across," says Hakan Enver, Managing Director at Morgan McKinley UK.
Morgan McKinley's recruitment monitor for Q2 2023 revealed an 86% decrease in jobs available compared to the same quarter of 2022 in a further sign of easing labour market conditions in the financial services industry.
ONS wage data has revealed salary inflation in the UK's financial services is particularly acute and any slowdown here could signal easing conditions more generally.
The Bank of England raised interest rates 50 basis points last month in response to stubborn inflation that it says is partly a result of inflation-busting wage settlements.
Falling wages and easing labour market conditions can therefore offer the Bank a chance to hit the pause button on its hiking cycle before year-end.
According to Morgan McKinley, UK businesses have taken a more cautious approach to hiring following the collapse of two major EU financial institutions, continued high inflation, further rises to interest rates and a continued threat of recession.
"Whilst it may seem a bit gloomy, the data simply suggests a realignment in hiring trends. Levels are returning to those seen prior to the COVID-19 pandemic in Q1 2020. Back then there was an initial decline in job roles, followed by a surge during the post-COVID recruitment spree. We’re seeing slower hiring processes and companies delaying hires to ensure they’re selecting the right candidate," says Enver.
Morgan McKinley reports companies are making redundancies and a greater proportion of jobseekers are active compared to pre-COVID, meaning prospective employers are able to offer more reasonable pay packages.
"This is a stark contrast to Q2 2022 when it peaked at 25%. With so much rhetoric around wage inflation, there does appear to be more control from corporates in not offering exaggerated financial packages to tempt people across," says Enver.
"The average salary change in the London market is dropping considerably and as such, let’s hope that with other economic drivers, the UK will soon start seeing inflation falling further," he adds.