Springy I would say in a nutshell, there is a sense of cautious optimism pervading the economic landscape. After a challenging year in 2023, characterised by sluggish growth and uncertainties, many businesses are now seeing signs of improvement and brighter prospects ahead.
As we approach Q2, we still confront formidable challenges. Despite this, the labour market demonstrates resilience, with signs of gradual improvement in the balance between labour demand and supply. However, the path to a soft landing remains uncertain, with recession risks looming large. With inflationary pressures easing a little, the cost of living standards remains high. Nonetheless, the labour market's robustness shines as a rare bright spot amidst the economic turbulence. With a general election year on the horizon, the economy's performance faces heightened scrutiny, adding further complexity to the landscape.
The UK labour market was piping hot in 2022 and has spent much of 2023 slowly coming off the boil. And while the market continues to simmer, the headline inflation is nearing the 2% target, mortgage rates are increasingly improving month on month as banks respond to a more positive property market in the UK. There are real signs of regional growth, income sustainability, and general confidence in the market however, the volatility in global energy prices remains a concern given the upheaval in the Middle Eastern conflict.
In contrast to the broader economic challenges, the banking and finance market appears poised for a transformative year in 2024. AI is set to play a pivotal role, revolutionising various aspects of the industry. From enhancing customer experiences to reconstructing financial management tools and streamlining back-office operations, the influence of AI is becoming increasingly pronounced. This anticipated wave of innovation suggests a landmark period ahead for the banking and finance sector, marked by significant changes and advancements driven by the integration of artificial intelligence technologies.
I might be heading off topic a little, not much, but sports always creates a mood of optimism, and with the Olympic Games set to take place in Paris and Team GB aiming for a strong performance, there’s a sense of anticipation and pride in the air. This combined with the England football team heading to Germany to contest the European Championships 2024, things could kick off.
In my opinion, the mood of our nation needs to change, the economic damage of the last 3 years is evident in how 2023 shaped up. This year, 2024, is a year for recovery, a year for optimism and changing the downward curve, for this to happen we need to get it back to its base. The UK economy has always been resilient and there is no question we will pull through with this, but this requires a high voltage of transformation.
The dynamics of the post-pandemic job market are shifting, with employers gaining more leverage as labour demand softens. This marks a departure from the candidate-led market observed earlier in the pandemic.
One notable trend is the shift towards traditional office-based work, with many employers implementing return-to-office (RTO) mandates. This move is reflected in the declining share of job postings mentioning remote or hybrid work arrangements. While the proportion of such postings remains higher than pre-pandemic levels, there has been a notable decrease from the peak observed earlier in the year.
Interestingly, the changes in remote or hybrid work arrangements vary across different industries. While tech occupations have seen a decrease in remote or hybrid postings, sectors like banking & finance, insurance, and legal have experienced an increase. This suggests a divergence in approaches among industries, with some firms in traditionally office-based sectors embracing remote or hybrid work arrangements more readily.
Fintech, or financial technology, encompasses various technologies aimed at providing consumers with greater control over their financial activities, including managing, spending, and investing their money. One of the most prominent applications of generative artificial intelligence (AI) in fintech is through chatbots. These chatbots allow customers to interact with banking apps and online money services using natural language, providing a more intuitive and user-friendly experience.
Major financial services players such as Bank of America, Wells Fargo, BlackRock, and Citigroup have already implemented or announced initiatives centred around generative AI. These initiatives aim to leverage the capabilities of generative models to enhance customer experiences and offer personalised financial services.
In 2024, the UK banking industry faces substantial influence from external factors, including heightened political instability across Western democracies. With nearly 70 elections on the global horizon, uncertainties abound, challenging the industry's structures, confidence levels, and financial performance.
Given this unpredictable landscape, UK banks are laser-focused on fortifying profitability, optimising operations, and harnessing emerging technologies to navigate market turbulence effectively. However, heightened economic and political uncertainty may result in varied performance across banks, with interest rates potentially peaking in the first half of the year before moderating.
To address these challenges and prioritise profitability, UK banks are re-evaluating their operating models to enhance efficiency. This involves resolving friction between legacy infrastructure and digital channels while placing customer needs at the forefront of delivery models.
While digital banking continues to gain traction, many UK banks still rely heavily on traditional branch networks. In response, banks are advancing strategies to transform physical branches into versatile hubs offering value-added services like financial planning. Rather than wholesale closures, the emphasis is on right-sizing the branch footprint to align with evolving customer preferences and market dynamics.
As profitability remains paramount, UK banks are expected to maximise their physical and digital channels, ensuring they meet the changing needs of customers while driving operational efficiency and sustainable growth in the dynamic landscape of 2024.
In the landscape of UK banking, the reliance on traditional branch networks persists even as digital banking gains momentum with higher transaction volumes. Looking ahead to the coming year, UK banks are strategising to revamp physical channels into versatile hubs that offer value-added services such as financial planning. Rather than wholesale closures, the focus is on optimising the branch footprint to align with profitability goals.
In line with this, UK banks are actively forging partnerships, launching digital banks, and modernising legacy IT systems to enable seamless omnichannel delivery. The aim is to blend lower-cost digital self-service with personalised relationship management through remote channels. Open banking initiatives are also gaining traction, offering opportunities for banks to enrich their offerings by aggregating financial information from various sources.
Establishing the right balance between digital and physical channels remains a key priority in 2024, with many UK banks recognising this as an ongoing process. However, challenges persist, particularly in addressing legacy work cultures that may not fully align with the values and priorities of younger employees.
To address this, UK banks are committing to hiring more early-career talent and implementing initiatives to foster intergenerational collaboration, digital skills development, and diversity in talent pipelines. While progress is underway, banks acknowledge that cultural transformation is a long-term endeavour that requires sustained effort and investment.
Moreso than ever before, we expect the institutions we do business with to prioritise sustainability and ESG factors in their decision-making. In the financial services sector, this means supporting investment in green initiatives such as renewable energy, recycling, and carbon footprint reduction. Sustainable financial products are emerging, allowing customers to ensure their money isn't being used to cause harm to the environment or society while it is gathering interest in a bank vault.
Key summary:
- The UK employment market is continuing to show resilience as we prepare to kick into the 2nd quarter of 2024.
- The Banking & Financial Services market seems to be back hiring again, growing in the UK, and hiring with confidence.
- Foreign interest in UK jobs has doubled in the past two years amid record net migration.
- GenAI will disrupt the job market and has already ignited rapid job growth in its creation and use.
- Candidates are likely to retain a degree of leverage over pay and conditions, with flexibility set to remain a powerful tool for job attraction and retention.
Thank you for reading this, if you are looking to hire in the UK or are looking for a new role, please get in contact with us here at ETRA Talent.