Although redundancies have, so far, been limited, the fear of collapse and a return to the austerity of the early Nineties, when blue-chip firms such as Goldman Sachs were laying off staff by the thousand, means conspicuous consumption and optimism are becoming things of the past.
The latest to feel the chill are staff at Warburg Dillon Reed, one of the City's top securities firms, who are waiting for substantial lay-offs to follow last week's disclosures that the bank's Swiss parent has suffered serious losses from its investment in high-risk hedge funds. Insiders say that Warburg's 4,500 London-based staff expect announcements detailing cutbacks later this week.
The latest quarterly survey of the UK financial services industry by the Confederation of British Industry and consultants PricewaterhouseCoopers yesterday showed business confidence among financial sector firms falling to its lowest for eight years.
Businesses that have already announced lay-offs include ING Barings, Robert Fleming and the Japanese firms Daiwa and Nikko.
One of the larger firms, Merrill Lynch, has cancelled its Christmas party and ordered staff to cut back on overseas travel, entertainment and the use of mobile phones in an attempt to save pounds 150m this year. Job cuts are expected to follow. The firm lent billions to high-risk hedge funds.
It is feared that at least one international bank could go under because of losses to these highly speculative operations.
With nervous investors sitting on their hands, traders have had more time to spend in City drinking haunts, swapping gossip over the latest bank to hit trouble, or just drowning their sorrows.
The cutbacks are likely to be even more painful this time because of the speed with which this crisis has hit. Many firms were still trying to recruit in August, pushing some salaries to stratospheric levels. Nowexpansion plans are on hold.
"First to rise, first to go," said Joseph Toots, a stockbroker, sipping a glass of Zinfandel in a Broadgate wine bar. "My job may be a trifle insecure at the moment, but who knows, let's wait until Christmas." Mr Toots knows that his bonus, which last year was "definitely six-figure", will be minimal this time. "Good thing I bought my house outright," he said.
It is the middle-class, high-income thirty-somethings, for whom wealth is more a prospect than a reality, who may be hit the hardest.
Julia, a consultant, says she and her husband are delaying the day when they will have to sit down and face financial reality. "We earn almost pounds 100,000 between us, but with the mortgage and the school and the nursery fees [they have three small children] we're not going to survive like this."
She says she was depending on her share portfolio to cover the mortgage on their three- bedroom terraced house in Islington, north London, and it no longer does. "The house may have to be sold," she said, "and God knows how we will afford the school fees."
Isobel Thacker, a banker, said the same problem has just made her cancel plans to move house. "I can't afford [it]," she said. "We're all staying put."Reuse content