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 says.
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.
The Royal Bank of Scotland group has already said it will shed 200 City jobs while Citigroup is to reduce staffing by 2,000 across its London and New York operations.
But CEBR said that was just the tip of the iceberg.
Paralysis in many financial markets combined with a weaker outlook for Britain and the rest of the world would see jobs reliant on the City of London fall from 351,000 in 2007 to 342,000 by the end of this year and 334,000 in 2009, it said.
That would see 25.5 percent more jobs shed than the number of redundancies resultant from the dotcom crash at the start of this century, when 15,300 jobs were lost.
Levels of employment are unlikely to fully recover to 2007 levels until 2012, the CEBR said.
Richard Snook, an economist at the CEBR and one of the report’s authors, said: “The breakneck expansion of City jobs since 2002 will come to an end this year.
“The finance sector is currently engulfed by bad news stories; billions have been lost on asset write-downs, the credit crunch has made it more difficult for banks to secure funds and activity in profitable sectors like mergers and acquisitions has ground to a halt.
“Combined with the sharp slowdown in the UK and world economy, this means that substantial job losses are now inevitable.”
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