London Economic Conditions
Planning to move to London (IB, then recruiting to buyside) in the new year, but seeing an 18% CPI forecast + rumours of really tight rental conditions raises red flags.
What’s it like on the ground?
Is anything being done by govt to (try to) ease electricity price inflation?
Are IB / PE / HF employers increasing wages to beat CPI?
Thanks all - any intel is appreciated.
18% forecast is from Citi and it's the highest.on the street, take that as you will.
In answer to your questions:
It is as you read
No
No
Thanks mate, not ideal.
Are you feeling the pinch? I read that some German electricity bills are 10x annual run-rate, moving from €2k to €20k pa. Is this the media picking out a worst case scenario or are you expecting to lose £10-15k+ from higher electricity prices?
Nah I don't feel the pinch, I'm living same as I was 6 months ago.
My current elec bill isnt even close to £100pm so no I'm not expecting to lose 10k a year to utilities wtf. If it was that bad (and nothing was done), this would be 2008 esque.
Energy bills increase every 6 months due to the price cap being reevaluated, a UK specific mechanism which regulates the maximum providers are allowed to charge you per unit of electricity. Virtually everyone is getting supplied at the cap now, and providers are likely suppliyng at a loss and are getting help from the government to not go bust since autumn 2021 (even before Russia shenanigans started). The price cap itself is expected to rise more than 5x pre-pandemic levels, so yeah sucks but nowhere this catastrophic. Government is doing little in the way of helping, at least finance professionals who do not qualify for the schemes they put/will put in place.
My core costs in terms of rent, utilities, council tax, groceries have increased by 25-30% in one year, I am on a comfortable salary so I just save less. Salaries are not adjusted in consequence obviously. Remember the 12% figure is quoted as an average, some people will feel higher inflation, others less.
To be honest the economic situation is bleak but manageable. I do definitely think the UK is doing much worse than most other comparable economies in Europe.
High inflation, recession, and no deal flow. You don’t want to come here - unless you’re from a country where the situation is even worse.
Yeah bro, the uk is the only country currently in a recession and the bankers here only work on uk deals……
Obviously not - the EUR has now achieved emerging market currency status. Inflation in some Eastern European states is now 20%+. We will likely see an Italian / Greek / Spanish debt default in our lifetimes.
And hopefully also a pan-European civil war
Could someone currently working in M&A chime in on how badly deal flow has been impacted? Could we witness extremely low intern-analyst conversions for UK SA23?
definite big slowdown to date. widely agreed with lots of evidence: quarterly fee revenues down, bonuses down, seniors (at least at my bank) are acknowledging the tough market conditions.
as for the coming months, expect a similar trend especially so for UK.
dont mean to be the bearer of bad news but the general notion at my bank is that majority of SAs this year wont get the conversion, probably similar next year.
that being said, keep your head up and perform your best. no one knows for sure what will happen.
Thanks a lot! Would you also expect considerable Analyst 1 layoffs? I’m thinking if I should stay in continental Europe where downside protection (in case I’m fired) is better in my case or if I should risk London in case I get the opportunity
Depends on which team you work in. I'm in energy and infra and deal flow is still great. I wouldn't want to work in levfin or Sponsor atm tho...
Sponsor activity is down because of credit (higher yields and much less issuance appetite especially from banks), and lots of processes have been pulled. Strategic activity relatively robust although at some point the penny will drop that the acquisition maths doesn’t look so great when those buyers need to roll over their debt at much higher rates. On top of that the new issuance backdrop (equity and debt) is very poor so that will dampen firepower.
Biggest red flag regarding London is the demographic shift, which goes hand in hand with increased crime and rampant degeneracy.
Swear you're not even english...
The UK (and Europe) is in a bad place economically. Not just core inflation which is above US levels but a currency crisis (see EUR/USD inverting), interest rate crisis and a big energy crisis (and the 4 of these all compound each other). Industrial action is already taking place across sectors and we are at the precipice of a nasty wage price spiral. This winter will be brutal and will be in deep recession come January. Average household energy bills will be £5k p.a. in 2023 which one look at the UK savings rate will tell you will send chunks of the population underwater, and businesses will face the double whammy of their own energy (and other) cost inflation and severe demand destruction. Restaurant / pub sector will be hit particularly hard. Make no mistake the coming economic situation will make COVID look like a walk in the park.
Yikes… thanks for your thoughts
Add to this negative long-term demographic trends. Italy and Spain are projected to lose ~50% of their population by the end of this century. Zero to low productivity growth. No chance that they can pay off their debts.
Neither the short- nor long-term economic prospects for this continent are positive. If you are in your 20s and want to make money / have a lucrative long-term career you will likely have more success in North America or Asia.
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