Skip to main contentSkip to navigationSkip to navigation
City workers Canary wharf
Thousands of jobs are at risk in the financial services sector as several City firms begin to cut their costs. Photograph by Martin Godwin
Thousands of jobs are at risk in the financial services sector as several City firms begin to cut their costs. Photograph by Martin Godwin

City warned of looming job cuts as market turmoil takes its toll

This article is more than 12 years old
Confidence among 84 of financial services firms polled in the latest CBI/PwC survey, dipped for the first time since March 2009

Banks are suffering a severe slowdown after a torrid few months on global financial markets, according to a survey for the CBI. The downturn could lead to further job cuts in the next quarter.

The business lobby group warned that the mood in the industry had darkened, with worries about the fate of the eurozone and falling global demand for banking services.

The CBI said: "In the next three months, firms expect growth will be slower still and, for the first time in two years, there will be no improvement in profitability. Meanwhile, sentiment has fallen for the first time since March 2009, as firms anticipate more challenging conditions."

Of the 84 financial services firms polled in the latest CBI/PwC survey, 33% reported a rise in business volumes in the three months to September, and 24% recorded a fall. The resulting rounded balance of +10% is the lowest since June 2010 and represents a slower rate of growth than the June quarter when it reached +17%.

Many of the City's biggest banks maintained profits with increases in fees and commissions, but expect gains to be short-lived. A net 20% of firms are less optimistic than three months ago, the first time confidence has fallen since March 2009.

Ian McCafferty, chief economic adviser, said: "The recovery in the financial services sector is continuing but the pace of growth has slowed compared with earlier in the year. After a torrid couple of months on global financial markets, the mood has clearly darkened. Uncertainty about future demand, worries about the global recovery and shifting regulatory sands are weighing on sentiment.

"With business volumes predicted to slow further and little growth in income expected, firms are planning to reduce their headcount in the next quarter."

Several high profile City banks have come under pressure in recent weeks as investors fear their reserves will prove inadequate in the event of another financial crisis.

UBS, which announced a €2.3bn loss from trading irregularities, is expected to embark on large-scale cost cutting. It may also wind down its investment bank, which is a large employer in London.

US banks Morgan Stanley and Bank of America, which owns the stockbroker Merrill Lynch, are also under pressure to raise more capital and cut costs to cope with underperforming loans, mostly connected to sub-prime home loans in the US. Their London operations could be hit by redundancies.

Over the weekend Goldman Sachs was reported to be considering cutting bonuses in the wake of an expected third quarter loss.

The hedge fund manager Man Group said last week it planned to shed one in five employees, adding to concerns that many firms in the area of financial services known as shadow banking – when firms borrow and lend like a bank but do not take deposits – are suffering a loss of business.

Lloyds, Royal Bank of Scotland, Barclays and HSBC have seen their share prices dive since the summer on fears that difficulties among French and German banks will hurt their profits.

Insurers and fund managers have fared better, according to the survey, though they have also suffered from growth slow and are more pessimistic about the outlook than they were in the last quarter.

Mark Stephen, UK insurance leader at PwC, said: "An increase in business volumes and profitability has done little to reassure life insurers as predictions for new business remain low. Many expect to see the value of new business fall over the next three months as the economic backdrop puts pressure on the attractiveness of life insurance products."

Most viewed

Most viewed