Page last updated at 02:20 GMT, Friday, 5 December 2008

City Diaries

Man looking at a falling graph

Prime Minister Gordon Brown has announced additional help for people facing repossession. Eight major lenders have signed up to the plan, which is meant to cut the risk of homes being repossessed.

Our City Diaries are written by people who work in finance and have had a front row seat as their industry goes through the biggest changes in decades.

They will be giving us regular insiders' updates on the mood in the City of London and the dramatic changes in the world of finance.

EMMA

Emma (not her real name) works in a High Street branch of a large UK bank.

Walking into work today you could cut the atmosphere with a knife. I have never known the place to be so quiet, yet colleagues tell me they are hitting their targets which have been vastly reduced to compensate the 'credit crunch'.

The few customers who ventured in today were only interested in paying bills, unwilling to enter into conversations. A lot of customers today only wished to open a savings account from which bills were to be paid.

The focus at the moment is on insurance sales to generate commission. There is no humour in the place and hardly any talking amongst colleagues. At this time of year usually parties are being discussed or organised but not this year.

Products have been tightened with no chance of exceeding new recommendations for lending. Large deposits are now required and unless a 25% deposit is available for new lending then the answer is no.

Customers are telling us that job security is the main reason stopping them borrowing or splashing out on purchases as they used to. We are worried about redundancies too. Some of us were laid off a few weeks ago from another department.

Even the phones are not ringing nearly as much as they used to.

CAROLINE

Caroline (not her real name) works in a branch of another UK bank.

We all had high hopes that recent announcements would help kick-start the housing market and therefore mortgage applications.

All my colleagues know that now is not the time to be thinking of moving house with falling prices and job uncertainty. However, the company see it differently. They still expect us to be able to refer customers for new mortgages as if there was no problem at all. We try our hardest but that's just not good enough apparently.

Stress levels are rising daily, staff are going off sick and customers are becoming more agitated. Staff morale is so low, I think we are going to come back after Christmas and be told that's it, no more job! I really miss colleague banter and the support we gave each other. Now it's just think of number one.


TOM

Tom (not his real name) works in the investment industry.

Many traders I speak to argue that what makes this recession particularly nasty is that it didn't happen earlier. The longer the credit bubble went on, the bigger the pain would be when it burst. Cheap credit was just an illusion.

There are predictions that interest rates might be slashed further, perhaps to 2% in the near future. However, many are saying that the unthinkable will happen, that the UK will replicate what Japan did a few years ago and have a 0% interest rate in order to try and revive its economy.

The idea is to show the Bank's commitment to reviving UK industry. However, any measures take time to come to fruition and are heavily reliant on the sentiment of the financial markets.

While interest rate cuts might be seen as positive, they do not solve one of the fundamental issues behind this crisis, the fact that the cost of borrowing is not passed onto the consumers, and more importantly, that banks are not lending to each other. This has sucked the lifeblood out of the economy and is the first step to any recovery.

The recent pronouncements by our top politicians that they are thinking of ways to force banks to lend, illustrates just how crucial and acute this is.

In this sort of environment millions of households across the country have curbed their spending. This is another problem as demand for goods and services is clearly falling.

The overall conclusion is that we are in for a lengthy downturn and there is not much we can do about it. Any measures introduced by the Bank of England can only soothe some of the pain, they won't heal the UK economy on their own.



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