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French Market Report 2010 - Analysis by Sector

Here is a review of the market dynamics by major sectors:

Banking and Financial Services

Prior to 2009 the banking sector in France had just been shaken by Jerome Kerviel. However, with the exception of Natixis and Dexia, French banks escaped the worst effects of the credit crunch in 2009. They were helped by their diversification and cautious lending policies. In spite of this all the largest French banks were provided with and were required to take government support. Groupe Caisse d’Epargne and Bank Populaire, both mutuals, merged to form BPCE to become France’s second biggest retail bank after Credit Agricole.

Unlike the banking sector in other countries, French banks substantially retained their internal audit staff and redundancies were low. However, during 2009 there was little active recruitment and when staff left they were not replaced externally. Any external recruitment that took place was primarily at junior/graduate level.

We anticipate that recruitment in internal auditing and across corporate governance more generally is likely to recover during 2010. This will be driven by regulatory requirements and the banks return to profitability.

The insurance sector enjoyed greater stability and many of the larger insurance groups actively recruited during 2009. Of particular note was the demand for IT auditors. In 2010 we expect the implementation of Solvency II to help drive recruitment. In addition to providing general assurance on the overall project and the resilience and integrity of the models and systems being developed, internal audit will no doubt review financial inputs, validate scenarios and benchmark processes.

Commerce and Industry

France has many world class companies and a strong base in manufacturing, aerospace, energy and utilities.

During the second half of 2008 and early months of 2009 manufacturing output collapsed across the world. This trend was replicated in France and affected the number of internal auditors employed in the sector. The auto, aerospace, engineering and construction sectors were badly hit. Whilst they suffered from a limited number of redundancies and a complete freeze on external recruitment in 2009 they are now recovering. From our conversations with Head’s of Audit they appear optimistic that they will be recruiting in the second half of 2010. Sectors such as pharmaceuticals and retailing maintained the number of internal auditors they employed but did little external recruitment. The energy, oil and gas sector maintained numbers and actively recruited during 2009 and this is continuing in 2010. The utilities continued to recruit entry level graduates but only selectively recruited at more senior levels in 2009 and we expect this pattern to continue in 2010.

The Big 4

There were voluntary redundancies within the Big 4 particularly in the first half of 2009. They assisted staff who had taken redundancy by introducing them to the internal audit departments amongst their clients. Staff who left during the course of the year were not replaced and there were restrictions on promotion and bonus levels. Some staff became disillusioned at their prospects and looked to leave. However, the shortage of external vacancies particularly at senior auditor level ensured that few were able to leave to immediately join new employers. Whilst the big 4 are yet to undertake any significant recruitment in 2010 there are indications that they will recruit in the latter half of 2010.

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