City jobs: cull continues, but ‘light at end of tunnel’

Although it still regards heavy job losses as "inevitable", the Centre for Economics and Business Research has recently revised its City job forecasts upwards in the light of the "unexpected speed with which the financial crisis has turned the corner."

The CEBR estimates that the financial and economic crises cost the UK some 28,000 wholesale finance jobs in 2008.  This year, it now expects a further 29,000 jobs to be lost - some 5,000 fewer than it predicted last October.

Bank recapitalisation, the asset protection scheme and the sharp cut in interest rates have all helped to restore a degree of confidence in financial markets.  But despite this brighter picture, there will still be further job losses "as companies adjust to the newer reality of lower output and weaker profits from the City."

According to the CEBR, the worst-hit sectors are likely to be derivatives - with job numbers declining by over 40% from their peak as the demand for complex products dries up - and M&A-related corporate finance where, with no return to the merger mania of 2006/7 in prospect, jobs may fall by as much as 50%.

The CEBR's medium-term forecast is that City job numbers will gradually recover from this year's predicted low of 295,000 to around 313,000 by 2012.  This, however, remains well short of the 353,000 peak in 2007, with a more cautious City anticipating tougher regulation designed to set limits on its growth.

Senior CEBR economist and report co-author Richard Snook says "We are beginning to see light at the end of the tunnel for the City.  There will be further serious job losses as a result of the credit crunch but we expect this to be a one-off adjustment to the sector."