Merrill set to axe 800 staff in London

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The Independent Online
STAFF AT the City offices of Merrill Lynch are expecting 800 jobs to be axed next Tuesday when the firm announces a sharp fall in third- quarter profits as a result of the world financial market turmoil.

Globally, about 2,000 jobs - more than 3 per cent of Merrill's 60,000 employees - are expected to go.

Staff say that 160 of the London cuts will fall in the equity research division. The firm is also looking for savings of 70 per cent in the fourth quarter on variable costs such as travel and entertainment.

Merrill Lynch, the largest investment bank in the world, has cancelled its Christmas party for London equity staff and imposed draconian curbs on travel. Mobile phone use and attendance of all but the most essential meetings abroad has been restricted.

Mercury Asset Management, the City fund management group bought by Merrill for pounds 3bn earlier this year, is believed to have been spared in the cuts. Merrill is also keen to protect its corporate finance division, targeting the biggest cuts at research and trading, which are seen as more vulnerable in the event of a prolonged downturn.

The head of research, Charles Lambert, has told his staff that he will do his best to fight their corner, but that cutbacks are inevitable.

Merrill refused to confirm the number of job losses, insisting that no final decisions have yet been taken.

Merrill saw its shares fall more than $2 to $39 7/8 on Wall Street yesterday, while Goldman Sachs cut its earnings estimate for its rival by 30 per cent for the quarter.

The fact that research staff are likely to be badly hit by the cutbacks is all the more disappointing for Merrill, as it topped the prestigious Extel rankings in all categories of research last year.

Merrill is suffering badly from both the Russian bond crisis and exposure to Long-Term Capital Management, the hedge fund which came close to collapse last month. Much of the Russian and emerging markets trading was done out of London.

The firm lost $135m (pounds 80m) in trading in July and August, leaving it with a profit of $102m in the first two months of the quarter. Analysts say that September was slightly better, but the firm is unlikely to have made much money in that month either.

The cuts would be the most severe so far in the City.