Financial sector set for job losses and slowdown

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BRITAIN'S FINANCIAL sector expects a sharp slowdown in business and significant job losses in the first quarter of this year, according to the latest survey of the sector by the Confederation of British Industry and consultants PriceWaterhouseCoopers.

The biggest losses are falling in the general insurance sector, where mergers such as Commercial Union-General Accident last year and the flood of new competition are leading to substantial job losses.

Banks too are seeing significant contraction. Angus Hislop, senior banking partner at PriceWaterhouseCoopers, said this was likely to intensify as the euro throws into relief the price differentials between Britain and the Continent.

He also warned that the banking review headed by the former telecoms watchdog Don Cruikshank will put pressure on banks to cut prices in some areas.

"British banks employ a lot of people compared to their counterparts in continental Europe," he said. "The British banking sector is more profitable but whether it is more efficient has to be tested. On some measures, for example, people per assets, British banks are less efficient."

The one surprise of the survey was the securities firms at the heart of the City of London, which have seen a sharp rebound in confidence compared with the last quarter of 1998 after the financial markets turmoil.

According to the survey, optimism has seen the sharpest bounce-back since March 1991, with a substantial recovery in business volume, commission income, trading income and overall profitability.

However, the level of employment fell, reflecting the rapid response of big trading banks like Merrill Lynch and Salomon Smith Barney to the profits dip. However, the job cuts were in specific areas like fixed income and emerging markets, rather than across the board.