n Hundreds of broker jobs threatened as weak dollar and credit crunch squeeze sector
Analysts have warned that UK-based employees of major international brokers are at the greatest risk of losing their jobs, as the credit crunch and weak dollar take their toll.
The news follows Aon’s confirmation that 2,700 jobs will be lost as part of its three-year global restructuring programme – 1,300 more than it originally estimated – with cuts to hit the UK.
Analysts said brokers with high dollar revenues faced the biggest threat of UK job losses, as the relative high value of the pound meant staffing was more expensive in the UK.
The slowdown in the UK economy and the global credit crunch were also given as reasons for cuts being likely.
Charles Coyne, analyst at KBC Peel Hunt, said: “If revenues are in dollars, but expenses are in sterling – or euros – then expenses in areas where currencies are stronger become more of an issue.
“Brokers are in a difficult position. Primary insurers may be retaining more risk as prices drop, so there’s less to pass around to brokers,” he added.
Mark Adams, insurance partner at Deloitte, said that job losses at global brokers were a natural fall-out from the Spitzer reforms, but it was difficult to predict losses in the UK.
He said: “The stresses affecting the larger players are very different from those impacting on the smaller ones.”
However, research by Plimsoll Publishing suggests that 5,000 UK broker employees could lose their jobs, as a result of the slowdown in the economy and the credit crunch.
David Pattison, senior analyst at Plimsoll, said: “We can expect significant players making significant job cuts.”
When announcing its global restructuring plans in October 2005, Aon estimated a loss of 1,400 jobs worldwide by the end of 2007, with 750 going in the UK. But, this figure had risen to 1,800 jobs globally by March 2006.
Gretchen Roetzer and Gregory Dickerson, analysts at Fitch Ratings, said: “We would not be surprised if the recently announced programme was focused more on the company's European businesses, although further job cuts in the US and UK remain possible.”
However, they did not believe that Aon’s cuts were made because of potential subprime losses. “Fitch views Aon’s exposure, if any, to sub-prime losses as modest, and does not believe that these actions are related to investment impairments”, they said.
They added that it was “not clear” whether Aon’s biggest rivals, Marsh and Willis, would cut jobs.
A spokesperson for Willis said: “We are always reviewing our business model, but currently have no need to restructure or have significant job cuts.”
Marsh declined to comment.