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Merrill freeze on hiring staff after huge writedowns
Bill Condie15 Aug 2008
Investment bank Merrill Lynch today declared a total hiring freeze until the end of the year as it licks its wounds after billions of dollars in writedowns.
In a memo to staff, it said that it will not replace employees who have left, nor will it hire for positions that were previously budgeted for.
The move is grim news for the City which, along with homebuilders, is bearing the brunt of tough economic conditions.
Some 20,000 financial services jobs in London could go over the next three years, according to a recent report.
Royal Bank of Scotland said earlier this month that it may shed as many as 7,000 jobs by 2010, joining a long list of banks and financial firms reducing their wages bills.
Merrill Lynch cut 4,200 jobs globally in the first half of the year, and had a total of 60,000 employees at the end of June, excluding brokers.
The new freeze does not apply to the company's 16,690 retail brokers. Merrill Lynch has written down more than $45billion (£24.08billion) since the credit crunch began last year.
Chief executive John Thain said earlier this month that the company should return to profitability soon.
Merrill Lynch does most of its hiring in the first and second quarters, the memo said. It is looking at its 2009 growth plans to determine where its hiring priorities should be focused then.
So far Thain's hiring priorities for this year appear to have focused on senior level talent. This month, Thomas Montag began working at the firm as head of sales and trading.
Merrill granted him stock and options valued at about $40million, on top of a nearly-$40million bonus it agreed to pay him.
Meanwhile, it has emerged that Merrill may not have to pay tax in the UK for up to 60 years, as it carries forward massive operating losses.
"The loss has an unlimited carry-forward period," the firm says.
Merrill has booked nearly $30billion of losses in the UK, most of them this year. It is estimated that the Treasury could miss out on some $8billion in Merrill taxes.
Financial companies worldwide have reported writedowns and credit losses of more than $500 billion since the start of 2007.
New York's coffers are expected to be hit as some Wall Street firms pay little or no city or State taxes for years, Mayor Michael Bloomberg said.
Reader views (1)
Wouldn't be surprised if this has the hand of the Bush administration in it somewhere. Very little Brown can do about it except bend over really, although theoretically he could reduce UK Corp Taxes rates and make it uneconomical to shift the losses to the here. Does seem bizarre that the UK should bear the brunt of losses made by an American bank on US securities secured on US assets though. So much for 'the best chancellor the UK has ever had'
- Andy, London, UK., 16/08/2008 14:49
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