City fears job losses from credit crunch

By Thomas Edgington
BBC News

Some City workers may need to look for new jobs

It might be the start of the spring season, but many City workers are still feeling the winter chill.

Continuing turbulence in the banking sector, an economic slowdown, and profit falls and bonus cuts have led to increasing concerns over the future of the UK financial sector.

In times of such volatility, only one thing is guaranteed - some degree of job losses.

Forecasters such as the Centre for Economic Business Research (CEBR) are suggesting that the City could be facing up to 10,000 job losses this year - 50% more than they were predicting just three months ago.

The next couple of months will be crucial Belinda Walmsley, Joslin Rowe recruitment agency

And a new survey by the CBI and PricewaterhouseCoopers shows the financial sector is waking up to a harsh new reality as the credit crunch begins to bite.

The survey reports that the industry is facing its most negative employment outlook for five years.

Confidence has been sapped and most banks expect the problems to continue until the end of the year.

Spirit of fear

Wandering through the Square Mile it is easy to see that all is not quite well.

People aren't out partying like they were last year Mark, City worker

On an otherwise beautiful spring day in the City, I meet up with Chris in a local coffee shop. Chris is a young city employee who works for a large private investment bank.

He tells me that people are worried on a daily basis.

"It's not doomsday but no-one at this stage really knows the extent of the fallout. It's really playing on some people's minds and is a real lingering problem that won't go away."

Much of this fear has been generated by the rollercoaster events of the past few months.

Signs of the times

Financial institutions may have to cut back on staff

First of all, as signs of the crisis multiplied, the FTSE 100 index slumped 5.5% on January 21, its worst one-day fall in more than six years. In just a year the index has tumbled more than one thousand points.

And then there was Northern Rock, which had been unable to refinance its mortgages on money markets, and was finally nationalised in February.

Then came the collapse and subsequent takeover of Bear Stearns, the fifth largest investment bank in the US, which sent shock waves across the pond and brought with it a new wave of uncertainty and pessimism.

"We never thought a bank like Bear Stearns would go under. The next couple of months will be crucial," says Belinda Walmsley, communications manager of recruitment agency Joslin Rowe.

False rumours

Two weeks ago HBOS shares plunged 17% amidst false rumours that the UK's largest mortgage lender was in serious trouble.

Although the share price has since recovered, the episode promoted an investigation from the FSA, the City's regulator.

Sarah Williams, manager of recruitment consultancy FSS City, says the outlook remains very uncertain.

"We're finding that a lot of our clients are taking a 'wait and see' approach, hoping that actions by the Fed in the US or the Bank of England here might make future prospects a little clearer," says Ms Williams.

"As a result there are fewer jobs about and where recruitment is happening it is proceeding at a slower pace."

Empty tables

As I continue on my journey through the City I cannot fail to notice the array of fine restaurants, bars, tailors and jewellery stores. What really strikes me is that they are all empty.

I enter one of the famous clothes shops in the very heart of the City and speak with the shop assistant Nilesh.

"It's been much slower than usual", explains Nilesh. "Especially since after Christmas where we've seen a real difference. We've even had to change some of our promotions."

Afterwards I meet with Mark, another City worker, and he explains the situation from his point of view.

"Bonuses will be a lot lower this year. It's also made harder by the fact that people don't have the negotiating power they had last year and can't move to rival firms because of hiring freezes."

Mark is however optimistic for the future, expecting the sector to return to a bull market within a couple of years.

"Most people realise that these things happen from time to time. It's the younger people who haven't been in the business for that long who are jittery."

However he does concede that "people aren't out partying like they were last year".

He also knows of people who have turned up to work only to immediately be shown the exit sign.

Belinda Walmsley at Josin Rowe says despite being a cautious and slower year, recruitment still remains high.

"The situation is very different from the late 1990s, where there was a knee-jerk reaction, resulting in big job losses," she says.

"We've been through this before and the markets recovered. "The sector isn't in crisis. There still remains more jobs available than people, although the gap is narrowing.

"The phones are still ringing."