Knowledge & Insight

The War for Talent in Infrastructure

Wed 5 June 2013

Featured article - Infrastructure Journal - By Dan Tallis

People moves always inspire vast and fevered interest amongst the infrastructure community. Not merely because they indulge that voyeuristic element latent within us all that seeks to know what our colleagues and competitors are doing, where they’re doing it and how well it’s going, but also because in this climate of on-going economic uncertainty movements in recruitment are often, albeit at times speciously, viewed as indicators of market trajectory and company strength. Though unwise to infer general market outlook from hiring practice, the window of recruitment offers a unique lens into the attitudes of financial institutions, advisors and sponsors regarding market buoyancy.

A few weeks ago a colleague mentioned a view gleaned from the marketplace that infrastructure was currently experiencing a war for talent. The thesis was surprising. 2012 was less than a stellar year for infrastructure (IJ Global PF Infrastructure Review FY 2012) and the juxtaposition of this fact with the idea that firms were fighting for new recruits seemed incongruous to say the least. Whether this supposed war is real or illusory, it is not merely prudent but perhaps prescient to consider the arguments that purport to support or undermine its existence; in times of conflict it is those ignorant of the intricacies of the situation that are often the worst affected.

Market Outlook

Recruitment is a fluid market place. Although to an extent tied to the general macro-economic outlook the sector often exhibits peculiarly individual highs and lows. Additionally the differing areas of infrastructure recruitment (financial/advisory/technical) often display unique trends, each reacting to the wider economic climate differently.

Offering his perspective on the technical side, David Jackson, managing partner, Stone Executive said, "Over the last few years the infrastructure industry has been consolidated: over the last two years multi-disciplinary contractors have diversified, with a lot of building overseas the market is buoyant for these type of providers."

"Consolidation occurred through many companies scrapping their in house technically qualified departments, with the work then being outsourced to a consultancy," added Jackson.

In the finance sector, Dan McCarthy, director, One Search, claimed: "For four and a half years people stopped hiring and training new talent due to the economic crisis. So where there used to be lots of supply there is now only high demand. Banks and funds that weren’t allowed to hire now can and are trying to fill the talent gap at junior level."

"In 2005/2006 firms compromised on experience (but not academics/general calibre) to meet demand, individuals were thereafter trained at the firm. Now experience is key, and as long as that remains the case supply will be limited," added McCarthy.

It is no surprise that consolidation, hiring freezes and the disbanding of in house technical departments has dominated the recent past. The economic crisis hit us all hard. But what of 2013, has infrastructure recruitment picked up?

According to Peter Lynch, director, Sustain Resources, infrastructure executive search specialists: "The main activity in the infra finance market so far in 2013 has been around infrastructure and renewable funds - here we are seeing interest across the junior, mid to senior level. However because these are new and exciting opportunities there is a lot of candidate interest meaning funds have the power to pick and choose the best candidates."

Another prominent feature of 2013 recruitment is the growing international demand for UK talent and the increasing need for language skills in an ever evolving EMEA market place. "Generally, political uncertainty in the UK energy and renewable market is limiting growth and therefore impacting recruitment demand. That said, there is demand in other geographical locations such as Africa where there is interest in infrastructure and renewable candidates that have UK experience," said Lynch.

McCarthy noted that, "Languages really separate people. The EMEA platform is expanding and the old UK government instruments are not the flavour of the month. There is a particular demand for individuals who speak German, French and Dutch largely because of the deal flow present in those countries.

Sectors come and go

Senior vs. Junior

Recruitment has long been split into junior, mid and senior level posts. Just as the subsectors of infrastructure recruited differently under the economic crisis, the abundance, or lack thereof, of vacancies at different levels in the industry reflects the extent to which companies constricted hiring practices during the downturn, whilst the interest in what posts are available reflects the general attitude of industry professionals.

Speaking about senior level finance recruitment McCarthy claimed: "Senior level recruitment is pretty dead and has been for some time. A huge proportion of the senior characters in Infra & Energy finance are on the lookout to some extent - many of them in quite a desperate fashion. We only have opportunities for the very best, and even then it is usually only because the client wants to protect themselves from an avalanche of direct contact by passing the buck to us - they know the usual suspects that will be on the list. Many less solvent platforms or start-ups are braving that avalanche - and in fact direct moves through existing relationships are accounting for most of the senior movement at the moment."

Moreover, said McCarthy: "Platforms like GIB and the explosion of hiring at BTMU have soaked up some of the excess of senior guys in the market, but it is more of a merry-go-round than a war - the same people doing the same thing but on different platforms."

At the senior level at least then, it seems less a case of a war for talent and more one of supply versus demand. Far from a fight to secure talent, companies have a wide pool of candidates to choose from, giving them both the power and freedom to be selective.

Despite this some were cautiously optimistic that senior level recruitment was gradually picking up, Jackson arguing that "from a recruitment perspective things have been better at the senior level over the past few months than over the past few years."

There was greater consensus amongst the contributors about the junior side of the market. McCarthy said, "At the junior level the market is bustling. January 2012 to April 2012 was the worst four months of recruitment for a long time, but in contrast the Olympic summer was the busiest: from May 2012 the market exploded at the junior level and has been permanently busy for the last year."

Lynch agreed that junior level candidates were in demand but tied this demand to the need for language skills; "Junior level candidates and ones with European language skills are very much in demand, especially those with minimum 2 years relevant experience and a strong financial due diligence skill set," he said.

When asked directly about the existence or non-existence of a war for talent in infrastructure McCarthy argued that it "If there’s a war for talent it is at the junior level" before adding that "if the market picks up that war could move higher up to include senior level positions."

Finance

For those in finance the news from recruiters is far from positive - understandably banks and financial institutions have had to limit hiring in the wake of the 2008/2009 crash and this shows little sign of changing; the limiting effects of Basel III further stifling banks ability to lend and therefore their need to recruit.

McCarthy offered his opinion on the current recruitment landscape in some of the major financial institutions:

"Lloyds has shed 30 per cent of its project finance staff, and there are more cuts to come there. People at RBS and Barclays fear the same, and are treading water at best. Dexia’s entire project finance operation is defunct, the French banks are hardly rampant, and unless you are Japanese, the outlook for hiring within the banks is bleak."

This has created a war of sorts but between candidates not employers. "Presently there is a scramble among candidates to get what jobs are available in the infrastructure finance sector. Given the high volume of candidates, institutions have a lot of choice, meaning presently it's a ‘buyers’ market rather than a candidates market," said Lynch.

The proliferation of candidates within the finance sector is motivated by two distinct attitudes to current positions, claimed McCarthy. There are those who "saw their job as a port in storm during the financial crisis", individuals happy to take shelter from the chaos of the economic downturn in a given position but who are now "stuck in their ports as the storm continues." The plight of these candidates is to be contrasted with those in good positions whose ear is being bent by tales of big hires and market rumours that encourage a grass is greener attitude: "A lot of MDs and Directors who have been in good jobs for the last 5 years don’t know how lucky they are. They are keen to look at new opportunities, not realising that 90 per cent of the market would kill for their job," said McCarthy.

Energy

The tableau of global energy has changed and continues to evolve. 2012 saw renewables overtake power for the first time in terms of volume by value and there is an undoubted buzz around new renewable technologies. To that end Lynch suggested that: "We have seen an upturn in the energy and renewable market and if there is a ‘war for talent’ it is in these sectors."

For McCarthy the rise in interest in junior positions in renewables is a question of perception; the junior market is more concerned with "what’s perceived to be sexy", with this perception behind the upsurge in candidate interest - "PPP’s are not something young people are interested in at present, whereas renewables are more sexy and therefore stimulate more interest," said McCarthy.

Technical

The subsector perhaps most resilient to the aforementioned fall in senior level recruitment is the technical side. The complex engineering and technical requirements of infrastructure projects demand a high level of specialist knowledge, with advisors and sponsors keen to recruit individuals with a strong history of success and a track record of project delivery.

This view was endorsed by Jackson who claimed that: "There is a shortage of senior staff on the technical side, i.e. with an engineering or project management background," adding that "technical people are hard to find: the nuances of construction are bespoke to the infrastructure industry."

Additionally the increasing range of viable energy technologies, particularly in renewables, is creating new demand. As the commercialization of energy sources like biomass, wave and tidal becomes ever more widespread, new expertise is required to bring projects to fruition. As Lynch noted "specialised technical and engineering professionals are in high demand particularly in emerging renewable energy sectors."

A changing landscape

The extent to which one can link recruitment practices to industry outlook is debateable particularly given opinions are mixed as to whether the market is picking up or if company headcount, streamlined to account for the economic crisis, will remain static.

There are those that claim, like McCarthy, that "the rise in recruitment could be a positive indicator for the market generally i.e. it could reflect the build out plans of the firms that are hiring: recruitment is the first to be hit in times of recession and the first to return when economic growth returns." Whilst others like Jackson contend that "because companies are increasing both revenues and profits despite tough trading conditions, keeping their cost base down will continue to play a big part in their success throughout the upturn. Many companies who employed people have realised that they can get the same results by having less staff, and I can see this pattern to continue moving forward."

What is in little doubt however is that the market has shifted, a fact which in turn has impacted recruitment. In an interesting indication of possible market direction Lynch added "the UK Government is looking to support infrastructure projects with bond finance, and there is currently a shortfall of people with recent bond financing experience in the infrastructure market. As such there are some notable examples of big banks adding head count to their bond advisory teams."

As Peter Lynch noted "there will always be a battle for the very best people, those with good reputations and specific skill sets," and whilst there are pockets of infrastructure in which companies are fighting for talent there is, as yet, no war.

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