Who said Brexit doesn't matter? Goldman Sachs International, the London-based branch of Goldman Sachs, just released its accounts for 2017. They reveal the firm seems to be shrinking in the City of London. At the end of 2016, Goldman Sacs International employed 6,125 people. At the end of 2017? Just 4,688.
As the chart below shows, the cuts were not evenly distributed. While headcount rose in institutional client services (sales and trading), it fell elsewhere else, but was down the most (nearly 50%) in support functions. However, the firm said it moved 1,700 support staff to an affiliate group, also in the UK: the jobs were not lost. When support staff are omitted from Goldman's numbers, headcount was down by only 3%.
The changes come as Goldman Sachs prepares to shift some London jobs to Frankfurt after Brexit. The firm is also adding support staff in lower cost centres like Warsaw in Poland and Bangalore in India as it seeks to save money.
Goldman's London staff remain well paid compared to staff globally. In 2017 average spending on compensation per head at the firm was $523k ($449k after employment tax and pension payments are subtracted). This compared to an average of $324k at Goldman Sachs globally last year. Moreover, while compensation spending per head at Goldman's global business fell 4% in 2017, it rose by 7% in London as lower paid support roles were taken out of the mix.
With Goldman's London business skewed towards sales and trading, staff in the City are comparatively successful. In 2017, each employee at Goldman Sachs International generated an average of $332k in profit per head after tax, compared to an average of $100k for each of Goldman's 36,600 staff internationally. Staff in the London institutional clients business were particularly lucrative, with each generating an average of $1.3m in operating profits for the firm in 2017.
Net profits rose 6% at GS International last year (to $1.6bn), while at Goldman Sachs globally, profits fell 48%.
If Goldman shifts jobs out of the UK, the country will feel its absence. Goldman Sachs International paid $278m in employers national insurance in 2017 (down from $329m a year earlier). It paid another $534m in corporate taxation on UK profits.
Goldman is in the process of building a new headquarters in London's Farringdon, which is due to open in February 2019. The firm has indicated that it could sell and leaseback the new office and that some floors maybe sublet. In its 2017 accounts, Goldman Sachs International notes that Brexit could have a "disproportionate effect" on its operations compared to rivals banks as a comparatively small proportion of its business currently takes place outside the UK.
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