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Jan 11, 2009

Recession: Financial sector to lose 15,000 jobs and confidence in the City plunges

Up to 15,000 jobs in financial services are likely to be lost over the next three months as confidence plummets along with levels of business.

In their latest quarterly survey, the CBI and the consultancy firm PricewaterhouseCoopers (PwC) said that companies across the sector, from fund managers and insurers to high street banks and building societies, were planning to step up redundancy programmes in the near future.

The forecast comes as Gordon Brown prepares for an “unemployment summit” with employers, unions and welfare providers in an attempt to stem job losses.

The survey estimated that high street banks and other lenders sacked about 10,000 staff between October and December. It is the fifth successive quarter of job cuts.

In London, tens of thousands of investment banking jobs have been cut by blue-chip companies such as Citigroup, Goldman Sachs, Morgan Stanley and Deutsche Bank, as well as by the failure of Lehman Brothers.

The Centre for Business and Economics Research estimates that 34,000 jobs will be lost in the sector this year, mainly at high street banks.

Lloyds TSB completes its takeover of HBOS in the next few days, which is likely to lead to tens of thousands of job losses in the next two years.

Royal Bank of Scotland, whose new chief executive, Stephen Hester, is conducting a strategic review, is also expected to cut staff numbers sharply.

The CBI estimates that a million people will join the dole queue this year, taking the total to about three million.

John Cridland, its deputy director-general, said: “Our survey confirms that the financial services sector remains very troubled.” Banks were likely to accelerate redundancies, he said. “Profitability has been falling in this sector for a whole year. It is not surprising that sentiment continues to be extremely fragile.”

The survey found that companies in the financial sector felt that it would be at least six months before the credit crunch showed any signs of easing.

Profits among banks, building societies and other finance houses are falling at their fastest rate since the CBI records began in 1989.

Financial companies expect things to get worse before they get better, the CBI found, as it also reported further concrete evidence that banks continue to deny loans to small businesses.

John Hitchins, a partner at PwC, said confidence in the banking sector was at its lowest level since 1998.

Then, international lenders were in the thick of a crisis, Russia was defaulting on debts and the American authorities were orchestrating the multibillion-dollar bailout of the hedge fund Long Term Capital Management.

The CBI called on the Government to stand behind British banks as its survey found that the level of business activity — including lending to companies — was predicted to fall at its fastest rate since 1990. This is despite the Government’s insistence that lenders should maintain a supply of credit to business to head off the worst effects of the recession.

Mr Cridland said that cutting interest rates was only part of the answer for the banks, although he praised the Bank of England’s decision to cut Bank Rate to 1.5 per cent last week.

“The Government must make it clear that it is ready to provide fresh capital to the banking sector if needed,” he said, adding that the £37 billion state-sponsored bank bailout package was “never going to solve the problem”.

Mr Cridland, who will take part in the Prime Minister’s jobs summit, urged the Government to consider using a combination of rescue strategies, including buying up mortgage securities and directly intervening as a lender to commerce if needed.

The economic downturn has reached the rarefied world of fine art (Catherine Boyle writes). The auction house Christie’s has sacked about 30 graduate trainees as it prepares for a reorganisation of the business.

Its main rival, Sotheby’s, has already said that it will save $7 million (£4.6 million) by reducing staff levels and other costs this year.

Staff at Christie’s are becoming increasingly nervous as it looks likely to announce a restructuring programme that is almost certain to include job cuts this month.

Last month its graduate interns, typically recent MA graduates who are paid £225 a week, were told not to return after Christmas. As they are officially casual employees, they are not entitled to any redundancy pay.

A spokesman for Christie’s declined to comment.

Christie’s sale of 20th-century British art last month, seen by many as the mainstay of British private art collecting, ended with 57 per cent of the lots successful — down from 81 per cent at 2007’s sale. The sales total of £4.1 million was less than half the

£9.4 million achieved last year.

Christie’s has already lost five employees after reorganising its wine and book departments as well as closing its modern and sporting-gun section

Source : TimesOnline
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