Recent market turmoil could spark 6,500 job losses and a drop in bonuses in the City of London, predicts the Centre for Economics and Business Research, as reported by the BBC. And investment banks and hedge funds will be hardest hit by these cutbacks.
Most cuts are expected in areas like private equity which rely on firms being able to borrow large amounts as these sectors have been brought to a virtual standstill by the global credit crunch. Credit problems have made banks much more reluctant to lend the money needed to make big takeovers, the BBC reports.
The CEBR predicts that investment banking will see the most cuts, losing 2,300 positions.
The report says 11,000 jobs were created in 2007, considerably more than the 4,000 originally forecast.
This job creation figure was revised upwards “because of extraordinary growth of the City up to the summer” taking jobs to a record high of 349,100 in 2007, says the CEBR.
But the centre suggested the job losses would be temporary, lasting until 2009.
The CEBR also added that while bonuses would fall in the short term, they would recover in 2009 and to hit Ј10.9 billion in 2011.