This week we hosted the latest in our quarterly series of events looking at London Financial Services, where a central topic being discussed was the increasing importance of geopolitics on the London economy. With delegates from leading recruitment firms including Morgan Mckinley, REED and Page, in this event we touched on:

• Rising unemployment and inflation: Should we be concerned?
• Increased defence spending in Europe: Will this drive the emergence of a new generation of technology companies?
• Suspension of the FCPA: What are the implications for how banks structure their Risk & Compliance teams?
• Slowdown in VC/PE funding for technology: What factors are driving this trend, and when might we see a reversal?

In the UK, Labour leader Keir Starmer has identified the NEET (Not in Education, Employment, or Training) issue as a policy priority, with one in eight individuals aged 18-24 currently falling into this category. Labour has proposed expanding and reducing the costs of training programs, but questions remain about whether these measures are sufficient. Additionally, there is growing debate over Labour’s stance on individuals who choose not to work due to perceived financial disincentives.

Meanwhile, despite rising inflation, the strengthening of the GBP against the USD is a notable factor. Given the UK’s status as a net importer of oil and gas, this should help mitigate inflationary pressures. Additionally, there is increasing discussion about whether the 2% inflation target remains necessary. Could a 3% target be more appropriate?

The budget is also a discussion topic for people in the industry, equally in terms of the YOY activity, the drop off in Q4 2024 was almost identical to that seen in Q4 2023. Just as importantly, the pick up in Q1 2024 was almost identical to that seen in Q1 2025. The point being Recruitment is tidal. Q4 will always see a drop off in vacancies, as companies plan for the new year and only really look to hire replacements. Similarly Q1 is always the busiest of the year for vacancies.

Otherwise, for the London economy, the changes announced to NICS have had less of an impact than the rest of the country, however the cost of personnel overall in the city has meant that in certain sectors, AI is being adopted at breakneck speed, especially in Financial Services. For example, the Insurance industry recorded record profits last year, yet had lower vacancies than the year before as AI integration into key processes across claims and underwriting accelerated.

One growth area to watch out for is Defence. With the paradigm for European security shifting, what is clear is that defence spending in Europe will need to increase, significantly. This is likely to lead to new kinds of technology firms emerge, that integrate AI, Robotics and military applications. Ukraine has proven the viability of the sector and as a result, there is likely to be a mass proliferation of this new generation of technology. The UK is well placed to lead here, so this could well be a growth sector to watch.

Additionally, the technology sector continues to dominate hiring trends in London. Fintech now ranks as the fifth-largest sector for professional vacancies, while traditional banking is contracting. This shift is occurring despite an overall slowdown in VC/PE funding. Looking ahead, PE/VC investment is likely to remain constrained in 2025, as funds grapple with liquidity challenges stemming from their 2020 portfolios. However, as divestment increases, asset managers are expected to show greater interest in new funds. While a significant shift may not materialize this year, it remains a trend to monitor.

For the UK, the path to prosperity seems to lie in walking this fine line between the USA and EU, where the success of the strategy will be defined by whether Starmer can negotiate enhanced trade agreements with both. Whether or not he can, will have a significant impact on the UK economy going forward.

Finally, looking ahead, PISCES offers promise and is a topic we will be discussing in depth at our next Finance Forum event in May. If you would like to know more about the next Finance Forum event get in touch. In the meantime, after feedback from the market, we are launching a new event series, we are calling the AI/Disruption series, which will be looking at how AI is disrupting industry. The first event will be in April, and will be examining Law Tech. To find out more about either event, please fill out the form below.