Not only will Brexit be used as an excuse for companies to lower earnings guidance and for central banks to provide more quantitative easing, but it may also be a scapegoat for banker bonuses in London being slashed – everyone can let out their collective gasp now.
As we have been covering, banker jobs have been getting cut for quite some time now, most recently with RBS announcing it will be cutting another 900 jobs. Times have been difficult for banks leading up to Brexit, but now, as Bloomberg reports, the message London's investment banks are giving staff this year is that in the aftermath of Brexit, just be thankful to have a job, and forget a fat bonus at the end of the year.
"It's a great opportunity to blame Brexit, giving people the message 'you're lucky enough to have a job'" said Stephane Rambosson, managing partner at DHR executive search firm in London, adding that bonuses could fall 30% or more in some areas.
Jason Kennedy, CEO of recruitment firm Kennedy Group in London said "Reality is going to kick in, today it's about job preservation, rather than bonuses. Things are going to change, and some people shouldn't expect any bonuses."
Jon Terry, a partner at PricewaterhouseCoopers in London, at least admits that things were falling apart even before Brexit: "If we hadn't had the referendum results, this year was looking pretty tough anyway. We haven't seen an end to various fines and compensation related to payment protection insurance and Libor. There are still billions of pounds being charged to the accounts. Ever since the financial crisis, there has been a need for reshaping the spend on compensation costs. Brexit is possibly one of the biggest catalysts for the next stage of reduction."
As Bloomberg explains, banks have expressed concern that the slump will continue after the vote:
On the advisory side, Goldman Sachs Group Inc. has said it expects a slump to continue as uncertainty about what Brexit will look like chills investment. The vote has already led to multiple deals being scrapped or reassessed. Even before the vote, announced mergers worldwide were down 11 percent from a year earlier, while global equity issuance fell by more than half.
Morgan Stanley analysts said in a note on June 29 that revenue from equities for European banks may fall about 18 percent in 2016, while fixed income and investment banking may decline about 13 percent each in the same period.
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Wherever the banks choose to place the blame is irrelevant however, as the impact is real. Banks will continue to fire employees if activity doesn't pick up, and the truth of the matter is that for most in the industry, having a job at the end of the year will be a welcome sight, even if no bonuses get paid out.
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