The UK Interim Market Remains Stable Amid Turbulence

In volatile times, interim executives can present an attractive solution. Adam Gates, Partner, Insurance, explains why demand is holding up across the Financial Services sector.  

Despite continued global economic uncertainty and stock market volatility, largely triggered by Donald Trump’s recent deployment of international trade tariffs, we remain cautiously optimistic for the interim executive recruitment market. During Q1 there were signs that the economy was going to pick up during the spring and summer, with February’s GDP rise exceeding expectations. Trump’s tariff chaos may have put an end to that momentum, nevertheless, there is some cause for optimism and we have seen relative market stability. There has been, and continues to be, a healthy demand across financial services for senior interim talent to provide a critical solution at the CxO level and in the management tier below.

There are two fundamental reasons why the interim market remains in relatively good shape. Firstly, irrespective of what the economy is doing, there is a perennial need for interim executives to fill short to medium term gaps in management teams in order to cover situations such as parental leave, long-term sickness or absences. This includes executives that wish to exit a business quickly, or be exited quickly, for a multitude of reasons spanning performance, conduct or changes to personal situations. Where there is no apparent succession plan in place, clients will turn to the interim market for highly experienced cover  whilst a permanent replacement is found. We regularly find  that each interim CxO our clients appoint  has the mandate to restructure their team, again resulting in gaps in management at the next level down.

The second reason relates to the current economic climate. Interim demand can be countercyclical in nature. At times of economic uncertainty clients are often more likely to look to the interim market rather than make a permanent appointment as it offers greater flexibility of working patterns. You can hire, and fire, quicker in response to changing circumstances, and an interim solution can often be more cost-effective. Particularly as interims are immediately available or on short notice periods so can start immediately.

Across regulated financial services sectors, activity has held up well for senior management functions (SMFs), notably Chief Financial Officers and Chief Risk Officers. Conversely there has been a small decline in mandates for new roles created by hyper growth and M&A activity. What new roles we have seen created, where interims can be incredibly effective, have been more operational, efficiency and cost oriented in nature, generally looking at the bottom line as opposed to the top line of an organisation and technology invariably has a role to play. Economic uncertainty has certainly spawned a degree of caution.

Smaller firms across financial services as a whole may also be drawn towards interim talent to meet their needs in the current climate. Succession planning can be an issue for firms with tighter remuneration constraints, some of which cannot afford managers ready to assume top roles within the organisation. We may see businesses in this situation hiring interims over permanent appointments to keep their options open. Perhaps, to capitalise on opportunities, they will look to convert an interim into a permanent hire. Conversely, they can easily let contracts naturally conclude if things do not work out as hoped.

Our Interim Financial Services practice covers all areas of the market, including banking, insurance, asset and wealth management, fintech and payments, and we have seen some nuanced differences when broken down.

Insurance has remained relatively buoyant over the past 18 months. Whilst areas of retail general insurance have suffered from regulatory changes, inflationary pressure and the cost of living crisis, the commercial re/insurance markets saw a record number of consecutive hard quarters, meaning growth. We are now moving into a soft market, hence our position of caution. There is still some growth, it’s just a little harder to find.

We wrote about pensions reform in February, and the Government’s push to deregulate the sector in order to unlock investment. We predict continued leadership changes, investment and movement as the year unfolds.  

Within our Banking and consumer finance clients we have seen less movement as clients remain cautious in their outlook and are adopting more of a “wait and see” approach as they are waiting to see how the economy develops and the results of the government’s proposed deregulation. These plans to roll back regulation may provide a catalyst for growth, albeit  there is a potential flipside of greater risk. The abolition of the Payment Systems Regulator and integration into the Financial Conduct Authority (FCA) has been announced and other regulatory changes will likely follow – which again is creating an atmosphere of uncertainty whilst these changes are announced and implemented.

In a rapidly moving market, being able to take a faster, more opportunistic approach can be the competitive advantage. Almost certainly we will see further consolidation this year within the Wealth Management sector, and Private Equity will play an important role. UK Asset Managers have been enhancing their risk management frameworks to harmonise with the European Union’s new Digital Operational Resilience Act (DORA). At the same time, they are having to think creatively about driving growth in a tough market. Interestingly we have seen an increase in interim Chief Revenue and Chief Commercial Officer mandates. This is contrary to what we’re seeing elsewhere in financial services, and is largely down to traditional models not yielding the desired results and hence a need for something different.

Insight and creative thinking are also in demand from firms to develop retirement solutions for a younger demographic. In February, the Pensions Policy Institute released a report commissioned by the Institute and Faculty of Actuaries identifying the barriers to building retirement savings faced by Gen Z. In a future piece, Odgers Interim will explore how asset management firms are responding to the younger generations’ changing approach to retirement savings challenges.

These are times of change for sure and we should expect the unexpected. In such circumstances, the cadence and flexibility of interim executive talent continues to have positive impacts on our clients.