Recruitment in London's financial services industry, battered during the credit crunch, is showing signs of recovery, with more than 80 per cent of hiring managers expecting recruitment volumes to rise in 2010, a survey found.

Morgan McKinley, a professional recruitment consultancy, said that 82.9 per cent of hiring managers expected recruitment volumes to be up on 2009.

"Our findings also highlight that over half of those surveyed are already finding it difficult to source professionals with the right skill set," Andrew Evans, managing director of Morgan McKinley's financial services division said.

"This insight from our survey provides a far more positive outlook for the financial services employment market in 2010 compared to this time last year and indicates that there is likely to be an upward trend in job vacancies throughout Q1 and potentially beyond."

Only 5.2 per cent of those responding to the survey of 124 human resources and line managers named handling redundancies as a key personnel challenge for the year ahead, but 45.2 per cent pointed to the threat of competitors poaching staff, with 60.9 per cent pointing to remuneration as a key challenge ahead.

The issue of pay - and particularly of discretionary bonuses - has become a hot topic in the banking and broader financial industry, a sector that has emerged from the crisis to find itself under increased public and regulatory scrutiny.

The study showed 45 per cent of those surveyed thought a 50 per cent tax on bonuses, introduced by the UK government last month, would make it more difficult to attract talent.

In December, hiring levels in the industry fell by 48 per cent month-on-month, according to Morgan McKinley, largely due to the holiday period. Compared to the same period a year ago, the number of vacancies was up 24 per cent.

Separately, in an indication of the caution that gripped bluechip firms across sectors last year, consultants PricewaterhouseCoopers found the 2009 average national earnings increase for Britain - 2.5 per cent - outstripped meagre rises seen by FTSE executives for the first time in a decade.

The survey found FTSE 100 executives saw pay climb just one per cent, with salaries flat on average for FTSE 250 companies. Around one in six FTSE 100 executive directors, moreover, did not receive a bonus last year.