As stuttering engines of the economy, banking and the IFSC are losing jobs, writes Fiona Reddan

WHAT A difference a year makes. Last December, the Expert Group on Future Skills Needs (EGFSN) published a report indicating that employment among international financial services companies would increase by 9,700 to almost 32,000 by 2012, with almost half of these jobs being created in the banking sector.

Almost 12 months on, the global financial landscape has changed beyond all recognition, with banks collapsing, banks being nationalised and banks being merged almost on a daily basis.

The expert group's predictions look like they belong to a different time - already the credit crunch has cost thousands of people their jobs and the chop is likely to come for thousands more before the situation stabilises.

Globally, it has been estimated that more than 130,000 financial jobs have been lost in the past 12 months, since the credit squeeze began. Meanwhile, in Ireland, the impact of global meltdown is starting to hit the financial services sector hard.

Earlier this year, the two major banks, AIB and Bank of Ireland (BOI), tightened their recruitment strategies, while firms such as Hibernian, Davy and NCB Stockbrokers announced outright redundancy programmes.

According to the Irish Bank Officials Association (IBOA), more than 1,000 jobs have been lost to date in the banking sector, as agency and temporary workers have been let go in large numbers.

And, as the property market comes to a standstill and banks' profits slide, further redundancies from banks are expected.

However, the major fear for the domestic banking sector must be the much-touted merger of two Irish banks, which could lead to significant job losses across the country.

According to Emer Lang, a financial analyst with Davy stockbrokers, the impact of any bank merger on employment numbers would depend on the degree to which the banks' businesses overlap.

A merger of Anglo Irish Bank and Irish Life Permanent, for example, would not lead to massive job losses, as Anglo's predominance in commercial and corporate banking would be complementary to Irish Life's insurance and residential mortgage business.

And, while former BOI chief executive Mike Soden has called for a merger of BOI and AIB on the grounds that it would restore faith in the banking system, Lang says such a deal is very unlikely.

Apart from the fact that such a merger would be extremely uncompetitive, with the new "super bank" accounting for 70 per cent of the clearing bank system, she says the Government is unlikely to allow such a deal due to the employment impact. As both banks' business areas significantly overlap, job losses would be in the thousands if such a deal was to progress.

In addition to domestic problems, financial services professionals have to contend with problems at a global level, as the number of mergers and takeovers is likely to have a knock-on effect on employment over the coming year. This is likely to be particularly evident among International Financial Services Centre (IFSC) banks, many of whom - such as Depfa Bank - have already taken significant knocks to their business models.

Following a merger with Bank of America, Merrill Lynch chief executive John Thain announced that the move would lead to "thousands" of job cuts at the former investment bank, primarily in information technology, operations and corporate functions.

As the bank's 800 Irish employees are concentrated in these areas, particularly operations, it is possible that the axe will fall further at the bank's two Dublin-based facilities, which have already let about 30 staff go.

Goldman Sachs is looking to cut about 10 per cent of its global staff, or about 3,200 employees, across the group's businesses and regions and, although the bank recently announced a strategic redirection which would lead to an expansion of its Dublin operation, the bank's Irish-based employees may be hit.

Moreover, as global equity markets continue to fall and redemptions rise, investment management companies, which are the backbone and the major employer in the IFSC, have also been hit hard.

For years, the funds sector was beset with staff turnover levels approaching 30 per cent, but much has since changed.

Nicola Kavanagh, managing consultant in banking and finance with Hudson Recruitment, says that recruitment in the sector is currently "so slow, I can't imagine it getting any slower". She estimates that overall recruitment volumes in the area of funds/IFSC companies is at about 5 per cent of what it would have been previously.

And, while viewers of job sites might be encouraged by the number of vacancies being advertised, according to Kavanagh, there is a big difference between the number of advertised jobs, and the number of actual "live" jobs.

Moreover, the outlook for the hedge funds industry, in which Ireland has established itself as a major player, servicing more than one-third of the global industry, looks precarious, following legendary fund manager George Soros's prediction that the global financial crisis will reduce the hedge fund industry to as little as one-third of its current size.

Already, plunging values in the industry have cost Ireland some jobs. Late last month, one of Ireland's largest hedge fund administrators, Citco (which employs about 1,000 people in the Republic in hedge fund servicing and data-processing-related activities), announced redundancies, with the number affected believed to be as high as 100.

And with the business environment for hedge funds expected to continue to decline, more bad news is likely to be on the way for the 4,000 or so people currently working in the sector in Ireland.

Indeed, the chief executive of one of the largest IFSC companies, Citibank, has already warned of major job losses. Speaking at the Irish Banking Federation conference last month, Aidan Brady said that in looking to cut costs, businesses could switch their operations from Ireland to lower-cost locations.

As employees become increasingly fearful for their jobs, it also means that they are loath to seek out new opportunities, fearful of falling prey to a "last in, first out" situation if they move to a company which later embarks on a redundancy programme.

Jason Kennedy, managing director of Manpower Ireland, says that this means that even where firms have job openings, they are finding it hard to fill them, as the new conservatism means professionals aren't looking to change jobs at the moment.

However, the credit crunch isn't all about job losses.

Cara O'Leary, a director with Áras Recruitment, says that there are still jobs out there. "There are certainly still hundreds of vacancies within the financial sector in Dublin - but maybe not the volumes in any one company that there might have been previously. As always, there is a demand for qualified accountants, across a number of industries," she says.

Indeed, accountancy is one profession that booms in almost any economic environment, with demand for advice for insolvencies and restructurings growing, given the downturn.

For example, in addition to its significant graduate programme, PricewaterhouseCoopers is looking to recruit 50 experienced professionals over the coming year, although this is down on previous years.

And, while the streets of London may be awash with former Lehman Brothers bankers, the situation is not yet as grave in Dublin, says Kennedy. He advises financial services professionals who have lost their jobs to keep calm and stay focused on the sector, and doesn't think a change of career is necessary, as he believes the sector will correct itself.