So where are we in this horrendous market downturn? Well, I suspect with no guarantees that technically the recession will end in the last quarter of 2009, lasting approximately 12 months. Over that time, we have seen a heavy level of cuts in the job market (unemployment at 2.4m at time of writing), with a substantial impact on the tax job market. But how long will it take before companies are confident again about the outlook and future growth of their businesses, and therefore confident to hire new staff again? I suspect another 12-18 months after the end of the recession, and so looking well into 2011, but it may even take longer than that. So how has this affected the commercial tax market, and those that work as inhouse tax professionals?
This particular recession has so far had a major impact on all employers of tax professionals i.e. Big Four / practice firms and industry. However each individual inhouse tax team is far less affected than the tax function of a Big Four firm. We estimate that the number of inhouse tax job losses across the UK over the last 12 months is approximately 350. This is the conclusion of some recent research and analysis that we undertook. However, let’s put this in context. Within the last 12 months, we have seen something like triple that number of tax headcount reductions across the Big Four firms, mostly in London. So my feeling is that whilst there have been a sizeable level of tax job cuts within the commercial market, no single organisation is majorly impacted, and they are spread across a wider geographical area.
In reality for inhouse tax teams, people are often forced to make departures as a result of one of two corporate scenarios: first, the company decides to relocate its head office, within the UK or overseas, as a result of a cost-cutting exercise. A tax person’s role may be offered to them in the new location, but in most cases they choose not to relocate. The second scenario is when companies merge or get taken over, often resulting in a duplication of tax roles, and thus fallout from the merged tax function. Both scenarios will take place quite often in a recession, and so I feel that inhouse tax specialists are more at risk of losing their job because of these events than from general head office cost savings.
In terms of hiring activity and people moves within the inhouse tax market, we sense this will stay at a low level for at least the next 12 months. There are two key reasons for this, which happen concurrently. Companies’ appetite to recruit may not start to increase until approximately 12 months after the recession is over, potentially end of 2010. At the same time, people feel that if the opportunities within their own company are not so good, they are not much better elsewhere, and so their appetite to look for a brighter future in another company is also very low. The first effect is a fact which will not change, however the second effect is more of a perception and that most people are risk-averse when it comes to their careers. As the general economy recovers and business confidence returns, these two effects will slowly fade away, hence entering into a period of much higher recruitment activity in which people start to switch around in the market.