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UK financial sector could see 20,000 jobs slashed: report

The credit crunch has made it more difficult for banks to secure funds and activity in profitable sectors.

Richard Snook, CEBR economist

The credit crisis could lead to almost 20,000 job losses in London’s financial-services industry over the next two years, more than were cut in the dot-com crash, the Center for Economic and Business Research Ltd (CEBR) said.

The number of jobs in the industry may drop to 342,000 this year and 334,000 next year, compared with 351,000 last year, CEBR said in a report published yesterday. Employment in London’s financial services may not return to last year’s level until 2012, the report said.

More than 15,000 jobs were lost in the collapse of the dot-com bubble in 2000, the report said.

Corporate finance, investment banking and derivatives will be the most severely affected, CEBR said. The increase in credit costs in the wake of the collapse of the US subprime mortgage market has curbed the pace of takeovers. The value of announced deals has dropped 33 percent this year to US$778 billion from a record last year, Bloomberg data showed.

“The credit crunch has made it more difficult for banks to secure funds and activity in profitable sectors like mergers and acquisitions has ground to a halt,” CEBR economist Richard Snook said. “Substantial job losses are inevitable.”

Citigroup Inc and Lehman Brothers Holdings Inc are cutting jobs after writedowns and subprime mortgage-related losses worldwide rose to more than US$245 billion. Royal Bank of Scotland Group Plc, the second-biggest lender in the UK, is eliminating about 200 jobs at its corporate-banking unit because of the credit crisis, people with knowledge of the plan said last week.
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