Buy. Sell. Buy. Sell. Up. Down. Up. Down. Not a particularly technical way of describing how the markets have been acting over the last few weeks I know, but this type of see-saw effect appears to be a normal way of life at the moment. As a recruiter, I keep abreast of all market activity, as what occurs within the financial markets and with banks in particular, dictates how busy the hiring market will be.

Over the last few days, reports of the need for further regulation have once again arisen, mainly driven by Vince Cable’s inability to understand that his version of reform will in actual fact harm the financial markets even more and thus lessen the UK’s competitiveness and overall attraction to new business. Some banks are already threatening to relocate their HQs to lower tax havens, not to mention more and more employees are considering relocating to other regions, again financially driven, which could ultimately lead to talent shortages in the UK.

What Cable fails to see, and what is excellently detailed in this report by Oxford Economics is that London’s economy will act as catalyst to lead the UK recovery as a result of its high export orientated, flexible, dynamic and competitive economy, both in terms of its businesses and its people.

There was also an interesting article in this morning’s City AM arguing that Cable’s suggestion that the government’s regulatory stance must get tougher will be detrimental to economic recovery. The article summarised some of the regulations that we already have in place, which banks in particular have had to adhere to and at times, at an unprecedented speed. These include: Basel 2.5, Basel III, Capital Requirements Directive 4, Living Wills, OTC derivatives, Prospectus Directive II, The Dodd-Frank Act, new taxes…the list goes on.

It is evident that London will have to play a significant role if there is to be a turnaround in the UK’s public finances. Unless the capital returns to making the significant contribution to the Exchequer that has been the norm over recent years, it is hard to see the overall UK budget deficit getting back to manageable levels.

By over-regulating and restricting free flow business, you naturally increase cost base. We won’t know until the 12th of September what the UK ICB’s (led by Sir John Vickers) final recommendations are for British banks but they are likely to include a requirement to impose a firewall between banks’ retail and wholesale operations into subsidiaries that must be separately capitalised. McKinsey estimates that this will raise the cost of funding for investment banks by about 94-113 basis points. Although, only UK banks will have to abide by these rules, I can’t help but worry that this may in fact further impact the overall recruitment market in London.

economic recovery, increased regulation, Vince Cable