Insiders say that the UK brokerage is on the brink of collapse and that further departures are likely within the next few days.
The blow comes on top of the humiliation dealt to Credit Lyonnais a fortnight ago when Royal Bank of Scotland had to bring Warburg Dillon Reed in to act as broker to its pounds 24bn bid for NatWest at the last minute because of concern that Lyonnais was not up to the job.
The firm has been in steady decline and on the corporate broking side is now almost exclusively a small company broker. "The whole place is completely falling apart," one insider said.
A broker from a rival firm added: "The French have engineered an elegant withdrawal from UK broking. What they have effectively done is pulled out without making a big announcement."
The departures appear to have been sparked by an attempt by Neil Pidgeon, the head of research, to cut costs by sacking eight analysts covering out-of-favour sectors such as motors, chemicals and engineering. This has caused uproar among sales staff who now find they have no research to market to clients.
Mr Pidgeon has justified the move by referring to the need to reorganise the brokerage's research effort on pan-European lines, chopping back pure UK-focused analysis and merging the UK and French teams.
He says the firm wants to concentrate instead on areas such as telecoms and media, highlighting the fact that Vivendi, the media and telecoms conglomerate, is one of its biggest French clients.
The move has sparked renewed criticism internally of the French head of the business, Pierre Walter.
Mr Walter took charge earlier this year following a management coup which led to the sidelining of Michael Kerr-Dineen, the former chief executive who now runs the private client business. Mr Walter was unwilling to be contacted.Reuse content