HSBC cuts hundreds of IT contractors

A cost-cutting plan by HSBC to layoff 1,100 staff in its global investment banking operation will put hundreds of UK IT contractors out of work.

Europe’s biggest bank by market value says 650 employees and 450 temporary workers, including contractors, face redundancy from the division’s business and IT support roles. About 500 jobs will go in the UK where HSBC said it had briefed affected parties of the cuts, which were necessary due to today’s tough “business and economic environments.” A spokesman for HSBC denied claims that certain IT workers, including contractors, in front, middle or back-office roles had been singled out for not adding enough value. “Within the IT contractor redundancies, HSBC has worked closely with the agencies and contractors to manage this as sensitively as possible,” the spokesman told CUK. “Some contractors who were very close to the end of their contract were a starting point and absorbed the focus, rather than those with a long period still ahead of them.” The cuts, which represent 4% of the unit, were described as “sensible steps” to take in response to today’s economic pressures and formed part of HSBC’s “cautious outlook for 2009.”

In August, HSBC global banking and markets reported pre-tax profits down 35% in the first half-year to $2.1bn, a 37% improvement from the second half of 2007. Overall, the bank posted a 28% fall in first-half pre-tax profits to $10.2bn, thanks to a $14bn hit from asset writedowns and bad debts in the US home loan market. For IT contractors, the bank said it would “continually review market rates and practices” to ensure HSBC was “competitive”, without saying if cuts had hit the departing contractors. Some banks, like HSBC rival HBOS, initially cut contractors’ pay at the first sign of financial woes, but evidently failed to yield enough savings and followed up by trimming their numbers. From now until Christmas, financers are expected to shed 12,000 jobs directly as a result of the credit crunch, swelling the number of staff they made jobless on last year by one third. The prediction, from the CBI, adds to the more than 80,000 job cuts across the banking sector in the past 18 months, which continue unabated as the borrowing and lending droughts intensify. This week, Britain’s biggest employers’ group said the ongoing drive to cut costs and a “readjust for lower demand” would see most financers drop their levels of IT investment. Its member survey found trading volumes were at their weakest since 1989 and profitability in financial services fell at a record rate, which was set to last for the next three months. Job losses were set to rise sharply over the next quarter, the group also warned, and 99 per cent of firms said it would take more than six months for “normal” market conditions to return.

Last night, the administrators for Lehman Brothers said a restructuring of the 105-year-old business would see 750 staff, mainly in London, made redundant from today. Tony Lomas, of PricewaterhouseCoopers, said it was “extremely disappointing” that the jobs at the bank’s European operation could not be saved “despite exhausting all avenues”.

* - Article from www.contractoruk.com

Recruitment firm Hays has a job on its hands

Last year, 80,000 people took the next step in their careers thanks to Hays. Alistair Cox was one of them. An industry outsider, he arrived to become chief executive of the specialist recruiter exactly 12 months ago and so far the civil engineer has made a rather good fist of it.
Yesterday's results were a record and were higher than the City had been expecting. Yet to his credit, Cox made no attempt to deny the simple facts that the trends are not moving in Hays' favour.

The UK, despite moves to expand geographically, still accounts for more than half of revenues and the signs are not good. Demand for temporary contracts are flat at best, while permanent placements are falling. In Australia, too, the markets are softening.

Unemployment has so far proved the dog that didn't bark during the current slowdown, but the beast is now clearing its throat. The most bearish economists are now predicting a jobless total of up to 2.5m (compared with around 1.6m now) if the UK slides into a serious recession.

The difficulty for Hays is that with visibility of barely six weeks ahead, it finds it very difficult to predict where its markets are going. The only thing it knows for sure is that they aren't getting any better - particularly in its largest specialities of accounting and finance, and construction and property.

Some analysts moved to downgrade their forecasts yesterday on the expectation of contracting margins, while less buy-back activity may act as a drag on the share price.

For investors, it is not all bad news; Hays has a strong management team and good track record and boasts fantastic cash conversion. It also carries an attractive yield and a strong balance sheet that contains minimal debt.

For Citigroup, for instance, it means the fall in the share price to under 94p places the stock far below the 110p it believes should be a theoretical trough.

However, on balance, the company is more likely to see bad news rather than good in the months to come, and investors are likely to find better value elsewhere. Sell.

* - Article from the telegraph

Recession in UK 'is months away'

The BCC says there is still time for the UK to avoid a recession

Recession looms in the UK in the next six to nine months as firms face "a difficult and risky climate", the British Chambers of Commerce warns. UK growth will be slightly negative or zero in the next two or three quarters, but a major recession is unlikely, the BCC says in its latest forecast.

But prospects will be worse if interest rates are not cut soon, it adds. The BCC predicts UK unemployment will rise by between 250,000 and 300,000 in the next 18 months to two years.
That could take the jobless total to more than two million for the first time since Labour came to power in 1997.

'Bigger danger'

"Over the next two or three quarters, we expect UK GDP growth to be slightly negative or zero, satisfying the conditions of technical recession," the BCC says.

"But the bigger danger of a major UK recession can and must be prevented," it adds.
"Our central scenario envisages that UK Bank Rate would be cut to 4.75% in [the fourth quarter of] 2008, followed by an additional cut to 4.5% in [the first quarter of] 2009.
"But if [the Bank of England's Monetary Policy Committee] decides not to cut rates in the next three to six months, growth prospects would be worse."
BCC director general David Frost told the BBC that the "full impact of going into a major recession as we did in the early 1990s could be avoided now".
Mr Frost said the UK needed "to get back to a a path of steady growth" as nobody wanted to experience the "major dislocation and major problems emerging from a deep recession".

Confidence falling

Whatever happens to interest rates, the BCC says, "a marked slowdown in UK activity is highly likely over the next 18 months".

This would be mainly caused by "a very sharp deceleration in consumer spending growth, in reaction to falling house prices and the acute squeeze on household disposable incomes".
At the same time, a new survey of 200 firms by Lloyds TSB bank indicates that nearly two out of three companies are more pessimistic about the state of the economy than they were three months ago.

One in five of them predicted that the level of activity in their business would decline during the next 12 months.

And the Institute of Chartered Accountants in England and Wales (ICAEW) has added to the gathering economic gloom with a survey showing another sharp fall in business confidence.
Its Business Confidence Monitor (BCM) index, covering the period from 24 April to 24 July, produced a reading of -25.7, compared with -19.7 in the previous three months.

WHAT IS A RECESSION?

There are a number of definitions of a recession.
The most commonly used one is when there are two quarters in a row of economic contraction, or negative growth.
But it is quite possible to have two quarters of negative growth and another couple of quarters of decent growth - so the economy actually grows year on year, despite going through a technical recession.

Jobs market

Unemployment will “substantially rise”, according to a new report.

The Ernst & Young Item Club summer forecast predicts gross domestic product will grow by just 1% in 2009, while unemployment will “substantially increase”.
The Item Club's chief economist, Peter Spencer, told Forbes financial news that high street and housing market conditions would worsen before things improved. Spencer said: “We have already seen a housing crisis that has morphed from a credit crunch to a general collapse in confidence, as prices have tumbled.”

* - the above article was taken from the recruiter.

G & G Recruitment still believe that the Public and Not-For-Profit sector will not be affected as much as the financial sector but, we have seen a drop in Permanent vacancies in July.