Permanent salaries

Starting salaries awarded to successful candidates placed in permanent jobs rose for a ninth consecutive month in July. Moreover, the rate of inflation accelerated to the strongest since February 2008. Just under 17% of panellists reported an increase in salaries during the latest survey period, which they attributed to stronger demand for permanent staff and shortages of quality candidates.

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Key points from June survey:

• Further strong rise in permanent staff placements, albeit slowest in five months
• Growth of temporary/contract staff billings eased to seven-month low
• Engineering/Construction most sought-after staff category
• Improvement in candidate availability
• Wages and salaries continued to rise

Commenting on the latest survey results, Bernard Brown, Partner and Head of Business Services at KPMG said:

“Demand for workers across all sectors continued to rise in June. Clearly, the proposed public sector cuts have not yet had an impact on the UK jobs market. However, it can now be only a matter of time before we will start to see the impact of the government’s efficiency savings strategy which is likely to leave hundreds of thousands of public sector workers looking for employment. The big challenge will be to transfer as many of these jobs as possible to the private sector through outsourcing and divestment, otherwise the economy will be put under enormous pressure at all levels.”

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KPMG’s Report on Jobs (see below) shows that this pattern is repeated across all sectors.

Pay Pressures

The recruitment industry survey tracks both the average salaries awarded to people placed in permanent jobs each month, as well as average hourly rates of pay for temp/contract staff.

Permanent salaries

May data highlighted a rise in starting salaries awarded to successful candidates placed in permanent jobs by recruitment agencies. The latest increase was the seventh in consecutive months. Pay inflation was solid, despite easing from April’s twenty-five month high. Consultants generally commented that higher salaries were the result of employers looking to attract skilled staff.

Temp/contract pay rates

Hourly rates of pay for staff in temporary/contract employment increased for a fifth consecutive month in May. However, the rate of growth eased since April and was subdued compared with the series’ long-run trend.

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The Report on Jobs (excerpt below), a monthly publication produced by Markit Economics and sponsored by the Recruitment and Employment Confederation and KPMG LLP shows:-

Stronger rise in demand for staff

The Report on Jobs Vacancies Index signalled an increase in overall demand for staff for the fifth month running in February. Moreover, the rate of growth accelerated to the strongest since July 2007. This was indicated by the Overall Staff Vacancies Index climbing from 61.5 to 62.4.

Permanent staff vacancies

Demand for permanent staff continued to rise during February. The Permanent Staff Vacancies Index recorded 62.7, up from 61.7 in January and its highest level for over two-and-a-half years.

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They are being notified across the commercial finance sector with a number of new entrants helping to re-energise the market.

A further positive signal is the number of employed candidates who are now looking for a career move, reflecting a measured confidence returning.

Key points from January survey:

• Growth of permanent placements eased from December’s peak but remained strong
• Temporary/contract staff billings continued to rise at marked pace
• Demand for staff grew at strongest rate since July 2007
• Candidate availability increased at slower pace
• Pay pressures remained subdued

Commenting on the latest survey results, Bernard Brown, Partner and Head of Business Services at KPMG said:

“The UK jobs market is continuing its journey back to health. Placements of permanent and temporary jobs have been rising again in January although at a slower pace than a month before, a reminder that the road to recovery will be bumpy. As confidence has returned to the private sector the starting gun for a public sector recession has only just been fired and its impact on the jobs market will be felt over the next 12 to 18 months.”

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Commenting on the latest survey results, Bernard Brown, Partner and Head of Business Services at KPMG said:

“The UK jobs market looks healthier today than at any time in the last two years which is, of course, encouraging news. Sectors like accounting and banking lead the recovery and we may well have reached the tipping point into growth, driven by returning confidence in the private sector.

“However, we are still to see the impact of the looming public sector recession on the jobs market, which will play out over the first twelve months of a new parliamentary term.”

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With the worst months of the recession having thinned the glut of low-risk deals once available in Europe, any lessor now relishes the prospect of fresh business with customers who are known to be of good quality.

For leasing companies which sit alongside other commercial finance units inside a larger family of businesses, a shrewd channel strategy at group level can leverage the sales of other divisions to boost asset finance performance, and use leasing relationships as a platform to sell other products.

Cross selling is no new concept, but 2009 seems to be seeing a marked trend for many financial services groups to integrate asset finance sales into a broader strategy aimed at selling a ‘solution’ rather than individual products.

Close Brothers Ltd, for example, began on August 1 to merge its Invoice Discounting and Asset Finance businesses into a single legal entity, under the banner of Close Commercial Finance. In time, CCF will also provide ancillary services such as foreign exchange through the support of embedded expert staff.

“Our aim, in addition to our traditional specialist lending activities” said Close Brothers director Mike Barley, “is to offer our SME customers an integrated one stop shop to meet all of their financing needs. Increasingly, we will be offering an integrated proposition to business introducers and customers”

In practice, the move will involve a weighty training programme for staff on both sides of the integration. This will be aimed at promoting recognition of customer need for invoice discounting in an asset finance relationship, and vice versa.

The integration is also expected to increase asset finance business introduction through professional services. Currently, invoice discounting business is regularly sourced through contact from SME accountants, and Barley hopes that by offering asset finance through the same organization as invoice finance, that particular channel will widen.

The UK’s largest banks are also in on the trend – HSBC Equipment Finance (HEF) already does 75 percent of its business with HSBC banking customers, and has embraced sales integration, not just as a mechanism for efficiency, but as a central part of a plan for rapid growth.

At the core of HEF’s expansion through the sales base of its parent is its structured finance team, which offers a much more holistic product (again, a ‘solution’) than just an isolated lease or contract hire.

Barclays Asset & Sales Finance, even more than HSBC EF perhaps, has set its sights on integration into a wider commercial finance operation. One of the fastest growing areas of Barclays Commercial Bank, BA&SF now operates effectively “as one team” with the rest of BCB, says asset finance head Alex Brown.

Within Barclays Commercial, he explains, there is no incentivisation linked to the sale of any particular product: “Our sales mechanism is all about selling the right solution to the customer. There are no product specific targets and we work closely together within the various teams.”

In addition, says Brown, the integration has proved “critical to continued safe lending” by collating risk information on customers. “We have achieved one ‘Risk’ view of the customer in Commercial Bank as a whole, giving us a new level of transparency and support to our customer base. Our interests and security should be cross collaterised, protecting all our interests.” He comments.

Prue Heron, director of recruitment company Commercial Finance People, says that integrating asset finance into a wider commercial finance offering avoids potential missed opportunities by specialists working in isolation, as well as offering economies of scale through staffing consolidation.

“In addition, from the customer’s viewpoint, this reduces the number of provider visits and ensures that an overall view is taken of the business. Products and services which complement each other are provided, to the benefit of the business.”

However, she warns, consolidation is not without its drawbacks: “In our experience, where organisations rely on one person to identify the need for, and sell the benefits of, a variety of commercial finance products, it rarely meets with success.”

“The knowledge and skills required for the identification of opportunities for the sale of asset finance, invoice finance or commercial banking are as different as the training and qualifications required for each of these sectors. They are all highly specialist areas and, whilst candidates do transfer between these sectors, it is only normally during period of candidate shortages when full training and shadowing is available.”

If a healthier economy presents itself next year, these multi-tasking lessors will have a chance to show how their adaptations to a sparse sales outlook perform in a less demanding market.

Contributed by Fred Crawley – Reporter, Leasing Life & Motor Finance – Leasing Life

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