​In a Brexit Coloured world, should you be a Limited Company Governance Contractor?

We live in exciting times. One year on from the UK vote for exit from the EU, the future is clouded in mist. The past year has seen tremendous uncertainty in financial services, fuelled by rumours - of a mass exodus to Dublin or Amsterdam, of a cull in permanent employees and of no future legal obligation to abide by any of the Compliance legislation that many have spent the past 20 years implementing and enforcing.

Behind all that noise, what does Brexit and regulatory change mean for the Governance labour market currently, for those who contract and for those who hire, and what does the regulation landscape in financial services look like in the short to medium term?

There has been a lot of speculation about the negative effects of Brexit and about the demands of regulatory changes. 

However, hasn’t change and uncertainty like this always been good for contractors? 

Broadgate Search are a leading recruitment agency specialising in the provision of temporary, contract and permanent staff into regulated and non-regulated financial services firms, consultancy firms and Fintech companies. We have a reputation second to none and, as we move forward into uncharted territory, this article looks to explore where the opportunities lie for contractors, and for Governance roles more generally, in the financial services sector. 

Positive signs of these opportunities are already apparent. Recruitment businesses across the UK have reported an increase in activity since the Brexit vote. The UK’s biggest advertiser of vacancies has reported that online adverts have increased by five per cent in the year following the vote. 

We, at Broadgate Search over the same period have seen a 39 per cent increase in permanent vacancies – which is good, given the pessimistic prophesies of last year - but a massive 100 per cent growth in contract roles. It appears that, in a time of uncertainty, contract roles are seen to offer less risk – and more flexibility – than permanent employees. We are also finding that the duration of contracts are increasing, contracts of length greater than 9-12 months are becoming more common as businesses look to create some continuity in a time of vast change.

The UK’s financial services sector is a fundamental component of the economy. It represents 7% of GDP; it is responsible for one third of our exports and, in turn, is one of the most heavily regulated sectors of the modern economy. Its pre-eminent regulators (the FCA & PRA) reflect in regulation the need to protect the public interest within a strong, stable and expanding financial sector. The design, application and supervision of this regulation within the financial sector has, historically, been set by the EU. Once exited from the EU, the UK will be responsible for its own legislation which, many in the industry fear, could mean deregulation in some areas and a reduced demand for compliance professionals.  

However, in our experience, the opposite currently appears to be the case. Take, for example, the new data protection regulation, GDPR which comes into force on May 25th next year. It is an EU regulation and as such in theory could fall away following Brexit. By now, however, companies have already invested huge sums of money and time to accommodate these regulations since their implementation programmes have, for the most part, already started.

Even if a Brexit agreement is made which doesn’t require firms to abide strictly to the GDPR legislation, being non-compliant in this law will make it far more difficult for firms to trade with the EU. In fact, Andrew Bailey (recently appointed CEO of the FCA) has stated his wish that, following the exit from the EU, that there will be common rules and mechanisms between the UK and the EU. Additionally, the UK government, has confirmed that the UK will opt in to current regulatory changes which will be enshrined in UK law.   

It has also been a hot topic of discussion – and offered as proof that the EU regulatory framework is here to stay in the UK - that the ICO (the UK’s independent Authority responsible for Data Privacy, and thus the GDPR initiative) has been investing heavily in growing its own resources to enable monitoring and enforcement of these regulations way beyond May 2018. Since the ICO is armed with potential fines up to £17 million or four per cent of global turnover for failure to comply, regulated companies are paying attention and, at the moment, do not regard on-going investment in Compliance as money wasted.   

Similarly, MiFID II will come into force by January 3rd next year while the UK is still in the EU and the UK will need to be fully compliant. 

The point here is that whilst Brexit does mean in theory that some regulations may be discarded in long term, those who think they can avoid complying now may well be caught out. This creates tremendous opportunities for limited company governance contractors – who have the expertise and can be hired for a fixed term, to carry out a specific, clearly defined project within a specific time frame. These specialists then offer much-needed flexibility to a company – with the ability to take on new tasks as the regulatory – and political – landscape changes. 

While it is unclear how the long-term relationship between the EU and the UK will be defined, there does appear to be a consensus that in order for UK firms to continue to trade with the single market in financial products that a lot of current regulations will have to remain in place.

There are, of course, a lot of new entrants in the UK market, the majority of whom are focusing on UK based customers and, as the fifth largest economy in the world, that is a lot of potential customers. One immediately thinks of the growing number of challenger and on-line banks (from the more established like the Co-Operative Bank to those in their Infancy – Starling Bank, Tandem Bank etc.) Conduct rules, such as MCOBS, ICOBS and CONC governing relationships between distributors and customers within this sector, as well as more recent initiatives including SMCR, are driven in the most part by the FCA and not derived directly from the EU.

These rules will still need to be adhered to – regardless of the EU. As these companies grow, their infrastructure will need to grow too and with it will come expansion of their Governance divisions. In our view, at Broadgate Search, a growth in Governance contractor roles looks set to follow, as a result. 

On top of existing challengers, there are numerous firms applying for licenses, so the market for Governance specialisms within this sector has huge potential for growth.  

Finally, there is Brexit itself which is itself creating demand opportunities for contractors. Roles vary from those aimed at mitigating risk post-Brexit, to those looking to take advantage of potential new trade opportunities with countries such as the US, China, India and Japan.  

Some of the larger firms such as Deutsche Bank, Fidelity, HSBC and Aviva have been seen hiring “Head of Brexit” positions or “Brexit Programme Managers”, showing that Brexit itself is generating new job opportunities.

The Big Four (HSBC, Lloyds, Barclays and RBS) have also been seen building out their practices specifically to consider Brexit, making numerous hires at a senior level.

I conclude with an interesting fact: the product of two negatives is a positive. The current buoyant market for Governance contractors in the face of both Brexit and imminent new EU regulatory demands appears to support this mathematical truth. 

At Broadgate Search we are positive about the future for the reasons we have explored in this article. But we, like everyone else, do not have a crystal ball. We believe in the resilience, the expertise, the imagination and the global strength of the UK financial services sector. 

What you think the future will bring, is, of course, another story. 

We are really interested to hear the views of anyone who operates within the regulated space; what you believe will happen as we move closer to Brexit, and what opportunities, and indeed what threats, lie ahead for those who operate within our markets. Please feel free to share any views and/or email Daniel.Tapsell@broadgatesearch.com