Someone once said that long-term planning at investment banks usually takes in what will be happening this time next week. Although perhaps a little harsh, the general point is well made.
Most of the large firms got involved in a free-for-all hiring frenzy earlier this year. Recruiters hadn't seen as much activity since the last mad unsustainable rush - the dotcom boom of a few years back. And all this on the back of just a couple of decent months on the M&A front, in January and February. As usual, most firms got carried away and made the classic mistake of believing their own hype.
Fast-forward a few months, and the M&A recovery failed to materialise, the easy money in fixed income is over and firms are failing to hit their revenue numbers. All of a sudden, there are restructures, reviews and end-of-year staff culls all over the place. Firms have lost their nerve and the axe looks set to fall for many more before too long.
But firms are in danger of repeating the mistakes of 2004 again next year - only in reverse. The first three months of 2004 were the best for most investment banks. The first three months of 2005, however, are likely to be the worst of the year. The economic fundamentals look promising and many feel the year will really kick-off in April. But, by that time, many investment banks will have got rid of staff and will then have to quickly hire in others (and probably more expensive others) to replace them, before they miss the gravy train.
All in all, it will be a good time to be in recruitment next year. Although the year is likely to get off to a slow start.