The eurozone debt crisis and economic stagnation in Britain will cause approximately 27,000 financial jobs to be lost in London this year, it has been claimed.
The prospect of increased financial regulation will also be a contributory factor in jobs being lost in the capital, according to the Centre for Economics and Business Research (CEBR). The economic think-tank has cut its estimates for 2011 employment levels in London to about 288,000 – some 66,000 below the peak in 2007 and the lowest number seen since 1998.
Stagnation has now been forecast for 2012, even though back in April the CEBR had predicted 2,000 jobs would be created this year and a further 3,000 in 2012.
European leaders have struck an accord with big banks to write off 50 per cent of Greek debt in an effort to get a grip on the eurozone debt crisis, which began in Athens more than two years ago. However, the eurozone still remains precariously positioned on the edge of another recession.
The crisis has sapped confidence and slowed market activity, with many of London’s investment banks cutting costs to remain profitable. The prospect of higher taxes and more regulation is driving some banks abroad.
CEBR economist Rob Harbron said: “These latest estimates demonstrate how London’s role as a key centre in global finance is increasingly at risk. With the possibility of further taxation and higher regulation constraining the relative desirability of London as an important financial centre, the gap between the rising Far Eastern centres such as Hong Kong and Singapore continues to narrow.”
Investment banks around the world have moved to cope with the uncertain economic outlook and the downturn in financial markets by streamlining their businesses and cutting jobs.
Japanese firm Nomura Holdings announced it is looking to carry out a cost-cutting plan which will be likely to have the biggest impact on its European operations. Meanwhile, Deutsche Bank’s pre-tax profits for the third quarter exceeded forecasts, but it warned that its investment banking branch could face more job losses as it deals with the toughest conditions since 2008.
Job creation in the banking sector could be shackled by tighter financial regulations suggested by a government report, the CEBR said. Hiring is forecast to remain level for the next couple of years before it is expected to increase in 2014, in line with the rising unemployment shown by official labour market data and the gloomy outlook for Britain’s economy.