THE LAST quarter of 2008 was one of the most challenging ever faced by the financial services recruitment sector, but will there be any improvement for job-seekers in 2009?

With the credit crisis rumbling on, the outlook for the domestic banking sector still uncertain and the economy in the doldrums, the consensus is that the first six months of next year will be very challenging, and that things may get worse before they get better, with redundancies likely to increase across the financial services sector. The big fear for 2009 is not that banks won't recruit - it's that they'll make hundreds of people redundant, as speculation continues over the possibility of a bank merger.

Marcus Kelly, manager of the executive recruitment division at FK International, agrees that 2009 will be very challenging, with only selective recruitment taking place. "The days of 'bulk recruiting', whereby financial services firms were looking to recruit 150 people within a year, are gone," he says, adding that recruitment in the year ahead will be "more selective, more interim and more contract based".

Although the domestic banks haven't stopped hiring completely, Brian Fowler, managing director of Accountancy Solutions, says that in lots of cases there are headcount freezes and banks are only considering recruiting for key positions when they can't find an internal replacement.

While redundancies in the financial services sector are increasingly hitting the headlines, Shay Dalton, managing director of Lincoln Search Selection, maintains that for many firms in the sector, redundancies are a last resort. "During the last downturn, financial institutions immediately shed jobs, but when the markets bounced back they had to rehire people - at a cost," he asserts. Nevertheless, the pressure to reduce roles in areas such as relationship management, credit lending and private banking, where revenue streams have effectively ended, will continue into 2009.

Moreover, there is likely to be additional fallout from the credit crisis among IFSC operations, as funds companies struggle to cope with reduced revenues due to falling asset valuations, and banks get caught up in consolidation at group level. Already, funds firms such as Citco have laid off staff, while international banks such as Naspa have decided to pull out of Dublin altogether.

However, Kelly says it is not all doom and gloom, that there is "always opportunity", and he points to firms who are viewing the current slowdown as a time to attract talent that they mightn't have gotten in the boom times.

One sector which is weathering the storm better than others is international insurance. Bermuda insurance firm Arch is recruiting for its new Dublin reinsurance operation, while global insurance firm Aon recently announced the creation of 100 jobs at its new research and development centre in Dublin. US life firm The Hartford, which is gearing up for expansion into Germany, is also actively recruiting for roles based at its Swords, Co Dublin, location.

Moreover, finance professionals working in industry and practice have not suffered as much as their counterparts in financial services. Dalton says that there are still "pockets of work", and it is "not as bad as people would assume".

"Accountancy is one of those professions which is resilient to the downturn because companies need these skills in a downturn as well as an upswing market," he says. "You can't let a financial controller go, and in many ways, finance professionals are the ones who are going to help companies trade out of a downturn."

Fowler is also seeing activity in accountancy, particularly in industry, while on the practice side corporate restructuring is busy.

However, salaries are likely to take a further hit in 2009, while the traditional bonus month of January is looking bleak. At Anglo Irish Bank, staff have been informed they will not receive bonus payments for this year, while a salary freeze has been imposed to reduce costs - this is likely to be reflected across the board next year, as banks continue to tighten their belts.

Professionals who have traditionally relied heavily on a significant bonus payment as part of their overall compensation package are also likely to suffer next year, as market turmoil means that most stockbrokers, fund managers and wealth managers will simply be glad to hold on to their jobs.

For the recruitment industry, 2009 looks set to be tough. ISE-listed recruitment firm CPL saw its profits halve in the six months to December 31st, and said the outlook for 2009 is "very uncertain".