10,000 finance jobs at risk

By John Hill on April 3, 2008 9:00 AM |

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THE CREDIT crisis could force the UK’s financial sector to shed at least 10,000 jobs in the next three months.

The Confederation of British Industry (CBI) predicts the country will dodge a full recession, but the squeeze in credit markets will force Wharf companies to trim their workforces. The forecast comes after UK firms reported another sharp drop in business from January to early March this year.

CBI chief economic adviser Ian McCafferty said: “It is clear that the credit crunch has worsened over the first three months of this year.

“We can expect further tough times in the financial sector, and as this feeds through into the wider economy it will inevitably be felt through slower economic growth this year and next.”

According to research by the CBI and PricewaterhouseCoopers, a quarter of responding businesses admitted they had cut jobs in the past three months, the highest rate since March 2003. Profitability in the financial sector dipped sharply, and plans for capital investment in the year ahead remain weak.

Andrew Gray, UK banking advisory leader for PricewaterhouseCoopers, said: “Banks are increasingly concerned about the economic outlook for the second half of 2008, and while there are some signs of optimism, the markets remain fragile.”

Billions of pounds have been wiped off the value of companies across the world since the American sub-prime loan market collapsed last year.
Northern Rock had to be nationalised to keep it operational after massive losses, and Canary Wharf tenant Bear Stearns was snapped up by rival JP Morgan in an emergency buy-out last month.
Other Wharf giants such as Citigroup, Bank of America, Credit Suisse and Lehman Brothers have already announced job cuts.

Geoffery Wood, professor of economics at Cass Business School, which has an office in One Canada Square, Canary Wharf, laid the blame for the crisis on over-confident businesses and “regulatory incompetence”.

Prof Wood, a former financial adviser to the Bank of England and an adviser to the treasury select committee on Northern Rock, said: “The financial sector has been booming for a long time. They thought it could carry on forever.
“Companies kept injecting cash into the system and got the idea there was no risk left. They were fools. It was certainly made worse by the regulatory incompetence of the authorities.
“I don’t think this is the end of it. You’re going to see a lot more losses being revealed over the next few months.”