Banks and other financial companies are planning a new round of job cuts after confidence in the sector dropped for the first time since the depths of the financial crisis, a closely watched survey shows.
The expected job cuts will follow thousands already announced amid a grim outlook for growth and profitability in the CBI's quarterly financial services survey. Financial companies expect business growth to slow and no boost to profitability for the first time in two years. Business confidence has fallen for the first time since March 2009.
Lloyds Banking Group and HSBC unveiled 15,000 and 30,000 job cuts worldwide in July, and Barclays has been slashing costs with more reductions expected in the banking sector. The CBI survey predicts pronounced cost reductions in securities trading with job reductions also spreading to the general insurance sector.
The grim outlook for the City follows one of the direst periods ever for financial markets. The FTSE 100 has suffered its fourth-worst quarter as fears about the eurozone debt crisis and a dip back into global recession have hammered stock markets.
Ian McCafferty, chief economic adviser at the CBI, said: "After a torrid couple of months on global financial markets, the mood has clearly darkened. Uncertainty about future demand, worries about the global recovery and shifting regulatory sands are weighing on sentiment.
"With business volumes predicted to slow further and little growth in income expected, firms are planning to reduce their headcount in the next quarter."
After a modest overall increase in employment in the last quarter, the City expects to cut jobs in the next three months. Firms plan to keep up spending on IT in a bid to hold on to customers, but uncertainty about business prospects will mean a cut in spending on land, machinery and other physical assets.