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Interim Market Report 2011 - Corporate Governance - The Market

We do not know how many people are employed in corporate governance in the UK or precisely how employment divides up between the different sectors of the economy. We perceive the different sectors to be financial services, industry and commerce, consultancy and the public sector. As a rough guide and this is perhaps influenced by the resources Barclay Simpson as a recruitment consultancy devotes to each sector, a split of 60% financial services, 20% industry and commerce, 10% consultancy and 10% public sector appears to us about right. Given that the financial services industry accounts for a little less than 10% of the UK’s GDP, the sector employs a disproportionately large number of the corporate governance practitioners. The percentage working in financial services is boosted by compliance managers who work exclusively in financial services together with a high percentage of risk managers. It is within this context that the Barclay Simpson Recruitment Index should be read.

Barclay Simpson Recruitment Index

The Barclay Simpson UK Corporate Governance Recruitment Index is based on the number of new permanent and interim vacancies registered in the UK. It is calculated on a three month moving average. The constituent recruitment markets that make up the Index are internal audit, risk management, compliance, information security, legal and treasury risk.

The Barclay Simpson UK Corporate Governance Recruitment Index

The Index has been calculated from 1st January 2008 which was the first day of the first quarter that the UK economy entered a recession. It lasted six quarters through to 30th September 2009.

The Index charts the course of the recession and the recovery. The Index troughed in May 2009 at 52, having halved from the onset of the recession in April 2008, to stand at 115 by December 2010 and 117 by June 2011.

Given that according to our Index the number of vacancies has increased in 2011, it may be surprising that the actual level of recruitment activity, and the number of people accepting new positions, declined during the first half of 2011. The corporate governance recruitment market no longer has the slightly heady feel that it had during 2010. There are a number of reasons.

First, whilst the total number of vacancies has increased, it is perhaps a little misleading in the context of overall market. In most areas of the financial services industry as we report elsewhere, the number of vacancies has declined. There are however three areas where the number of vacancies have grown. One is compliance which is not surprising given the number of regulatory initiatives that will go live in 2012. The second is in industry and commerce in areas such as internal audit, information security and legal and finally the consultancy sector.

Secondly, last year, as a consequence of the recession, there was a supply of readily available candidates to accept offers when they were made. This year the recruitment market is characterised by a shortage of candidates with the skills and abilities that are in demand. Most participants in the market are aware of this including employers who are currently more likely to provide inducements to retain staff who attempt to resign. For example the sheer demand for compliance managers precludes any possibility that they will be available in the recruitment market. The shortage is made worse by candidates seemingly becoming more cautious. Our comment on the current economic environment is hardly an endorsement of a healthy economy. If we are able to draw such conclusions so are other people.

Thirdly, there is a degree of uncertainly in the City. The Independent Commission on Banking has made its interim recommendation that have seemingly been accepted by the government. How this will affect the employment in the banks concerned remains to be seen.

Fourthly, profitability in the financial sector rebounded strongly last year along with most Western economies. Markets have proven more problematic this year and sluggish economies are not helping. Within the banking sector selective recruitment freezes emerged during the second quarter of 2011. This was in response not only to tougher markets but also to the sheer volume of recruitment that some banks undertook in the preceding quarters. Whilst corporate governance recruitment remains a priority, given this environment, many financial services groups will only recruit those who very closely meet their requirements. Our recent experience is that corporate governance practitioners with highly relevant skills are able to acquire multiple offers, those who do not struggle. Further, there are an increasing number of vacancies requiring specialist skill sets that are rare and therefore difficult to fill.

Given this scenario the propensity of financial services groups to recruit has slowed in the last six months. Our current experience is that employers wish to review more CVs, conduct more interviews and require the authorisation to recruit to be signed off at a higher level of management than in the second half of 2010.

Demand in industry and commerce, having lagged the financial services industry in 2010, has strengthened both absolutely and relative to the financial sector in 2011. Given the strong recovery in profits during 2010 we had been surprised at the low level of demand from industry and commerce. However the multinational groups that are responsible for the majority of demand returned to the recruitment market in the final weeks of 2010.

Whereas there is little evidence that companies in industry and commerce are looking to grow their corporate governance departments, the number of internal auditors, information security practitioners and lawyers employed in the sector has increased and is returning to pre-recession levels of staffing. Having now substantially made up on the recruitment lost during the recession, the principal driver in the second half of 2011 will be to replace staff as vacancies become available.

Demand for corporate governance expertise from the consultancy sector remained a feature of the recruitment market during the first half of 2011. The total number of corporate governance consultants employed is expanding as outsourcing and the use of consultants to help meet various regulatory deadlines continues to grown.

Demand from the public sector is now limited and we realistically expect little demand for the foreseeable future. Compulsory redundancies remain low but there is a steady stream of enquiries from corporate governance staff working in the sector.

We anticipated at the start of the year that 2011 will most likely be a year when the recruitment of appropriately skilled corporate governance staff would remain a challenge. To date we have not been wrong.

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