Credit crunch spells 20,000 City job losses

By Jennifer Hill

LONDON (Reuters) - Almost 20,000 City jobs will be lost this year and next as the credit crunch takes its toll, a leading economics think-tank said on Sunday.

The Centre for Economics and Business Research (CEBR) forecast 11,000 City job losses in 2008, up from a previous estimate of 7,000, and 8,200 in 2009, giving a total 19,200 -- a headcount cull worse than that when the dotcom bubble burst.

It is one of the findings of the latest issue of "London and the City prospects", to be published on Monday by CEBR, one of the country's leading economics consultancies and commentator on the capital's economic trends.

The worst hit sectors will be corporate finance, investment banking and derivatives, according to the report. Activity in these sectors has been disproportionately affected by the credit crunch, asset write downs and weakness in equity markets.

Dominic Walley, a senior economist at CEBR, said: "The persistence of the credit crunch and magnitude of its impact on many key markets in the City has forced us to revise our forecasts for City jobs in 2008.

"Furthermore, the outlook for 2009 has deteriorated; there is little sign of light at the end of the tunnel for the City."

At the same time, the value of merger and acquisition activity in the UK is expected to decline by 26 percent in 2008 compared with last year and volumes traded on the London Stock Exchange are set for a 36 percent drop.

Problems in liquidity markets, triggered by the sub-prime crisis in the U.S., have ravaged financial markets and seen the cost of borrowing soar.