After all, the banking industry has historically not been shy, or apologetic, about wielding the axe at the earliest sign of a downturn.
Last month, Goldman Sachs warned that it could axe underperforming employees as it vowed to slow hiring, despite its traders helping it to alleviate some of the pain of the dealmaking slump by successfully profiting from the wild gyrations in stock markets.
One insider at a Wall Street bank says that dealmakers working in capital markets and corporate broking teams will be the most worried as the outlook continues to deteriorate, while traders are likely safe for now as they continue to generate significant revenue.
David Solomon, Goldman’s chief executive, last month painted a gloomy picture for the global economy, warning of the risks posed by higher inflation, the war in Ukraine and tightening monetary policy.
“In my dialogue with CEOs operating big global businesses, they tell me that they continue to see persistent inflation in their supply chain,” he told analysts.
Denis Coleman, the bank’s finance chief, also said that Goldman was “closely re-examining” all its “forward spending and investment plans”, adding that this included slowing hiring and looking at reintroducing the year-end performance review for all of its employees, which had been scrapped since the pandemic.
Credit Suisse is also said to be weighing up plans to reduce thousands of roles globally as it seeks to slash $1bn off its cost base.
Banking is not the only industry in the City likely to swing the axe. Douglas Flint, chairman of FTSE 100 asset manager Abrdn, says he also expects the investment management industry to face some cuts in the next six to 12 months.
“I’m sure that’s the case,” he says. “When activity falls you need fewer heads. I think efficiencies will come in mid-level and back office jobs with the increased automation of processes. There’s been a healthy turnover [of staff] in the industry anyway.”
In the wake of the 2008 financial crisis, the number of people working in the Square Mile plummeted by 20,000 as London’s financial services industry was plunged into chaos.
Given the industry played a central role in fomenting that particular crisis, the imminent recession is not expected to cause cuts anywhere near as deep. Industry sources estimate the damage to be in the hundreds or low thousands.
The senior City banker says: “There will be more to come, but I think we can expect them to be relatively thin as the recession should be a relatively short-lived affair. While the IPO market has been weak these things can reverse quite quickly.”
He adds that while he understands why some people are concerned about job security, he hopes most can switch off after a difficult period.
“It’s been a brutal couple of years, especially during the pandemic. I just want my team to go off and relax,” he says.
