Downturn 'to cost 350,000 jobs in UK'

More than a third of a million jobs will be lost to the economy over the next 18 months, according to a survey of business leaders.

Research from the consultants Hay Group and the Centre for Business and Economic Research suggests that the downturn will cause a fall in employment of 350,000, with £900m wiped off corporate profits.

The Hay/CBER forecast indicates that the impact on profitability and employment of the combined effects of the credit crunch and the commodities price boom will last until 2010. However, the researchers say, Britain "will – just – avoid out-and-out recession".

Business leaders forecast that their companies' profits will fall by 1.3 per cent on average over the current financial year – a drop equivalent to a total of £900m if extrapolated across the economy – before recovering to grow by 2.7 per cent during 2009-10. Larger firms (those with more than 1,000 employees) expect to be even harder hit, with profits predicted to slump by 2.2 per cent on average.

Financial services bosses see an alarmingly bleak outlook, predicting an 8.4 per cent profit reduction for this year.

Investment banks have already unveiled tens of thousands of job losses. This week Citigroup will spell out details of where 6,500 previously announced redundancies will be concentrated. Citi has announced 13,500 redundancies but plans to say this week how up to 6,500 investment banking job cuts will be made.

Goldman Sachs is also reported to be considering major job losses, in addition to the 80,000 redundancies announced across the investment banking industry already this year.

Russell Hobby, an associate director at Hay Group, said: "These unsavoury conditions will not only hit profits in the short term, but will expose firms not ready to take advantage of the upturn when it comes."