City headhunters are facing the biggest wave of mandates since 2007, as UK plc reshapes its board and the financial services industry grapples with a dearth of staff untainted by the credit crisis.

Although many recruitment companies have suffered revenue falls of between 20 and 40 per cent in the past year, headhunters – which deal with people earning more than £200,000 per annum – have proved more resilient.

Specialists in board search and leadership skills have fared particularly well, with net fees – the income headhunters receive for placing candidates – rising 2 per cent in the past year.

Much of this has been driven by the financial services industry, where half of the largest 18 European banks have appointed a new chairman or chief executive since the start of the economic downturn.

But headhunters have also benefited from the amount of restructuring during the recession, with senior figures tumbling during the crisis and creating a wave of movement.

Barclays has hired Reuben Jeffrey, previously at Goldman Sachs, Simon Fraser, previously at Fidelity International, and Sir Mike Rake, previously chairman of KPMG, as non-executive directors, for example.

At the Royal Bank of Scotland, Stephen Hester, former chief financial officer at Credit Suisse and chief executive of British Land, replaced Sir Fred Goodwin as chief executive.

The research, contained in an exclusive report by Executive Grapevine, a publishing company, shines the spotlight on the secretive world of headhunting, where reputation is dependent on discretion and the last thing they want is to become the subject of the story. It shows the industry, much of which is privately owned, is braced for a recovery, especially at the top end of the market.

Although net fee income among headhunters overall fell 6 per cent between 1 April 2009 and 31 March 2010, the rate of decline has slowed as the drop is only half the previous year’s, according to Anna Weston, co-author of the report. Many of the larger listed companies such as Korn/Ferry have recorded a return to profit in the past couple of months.

But there are wide variations within that market. Headhunters whose business is focused on the “marzipan” layer of the executive market with assignments at the £100,000 to £150,000 salary bracket fare the worst because companies are using new technology or in-house search teams to recruit. Employees here are generally in their 30s and 40s and far more proactive in managing their careers, rather than waiting for headhunters to call.

But executive search consultancies specialising in boardroom searches for all UK companies have had a strong and consistent year, particularly smaller boutique firms. JCA, MWM Consulting and Zygos – all of which focus on FTSE 100 board roles – are sweeping the cocktail party circuit in a market where size isn’t a barrier to entry but a shortage of networks can be.

“It’s a relationship driven business; clients are often more loyal to the individual than the headhunter,” says Helen Barrett, chief executive of Executive Grapevine, and a co-author of the report.

Demand for headhunter services has been fuelled by the new corporate governance rules introduced last month, driving demand for experts in governance, risk and financial expertise.

Chairmen with the ability to head up audit committees are much sought after, while the renewed emphasis on succession planning led to a raft of nomination committees employing firms to find a pool of senior executives ready to join the management team and board.

In the financial services industry, banks that slashed thousands of employees at the height of the financial crisis have been aggressively trying to rebuild their teams. Financial services boutique firms have been recording double digit growth in net fee income, with most of the surge coming since November 2009.

“To say the City is buoyant and booming is an understatement,” says Ms Barrett. “Lots of people who were kicked out of the financial services industry have exited the market for good: their base knowledge has become redundant so there is a shortage of people with clean backgrounds who haven’t been tarnished with the troubles of the City.”

Headhunters generally charge a third of the first year salary of the person they’re recruiting, so a candidate hired for £500,000 a year may produce a £150,000 fee. But with salaries so high in the financial services sector, there are often caps on the amount that can be earned by the headhunter. Although these caps softened during the recession, they are now back to 2007 levels.

Get alerts on Financial services when a new story is published

Copyright The Financial Times Limited 2019. All rights reserved.
Reuse this content (opens in new window)

Comments have not been enabled for this article.

Follow the topics in this article