Headcount at banks and finance firms is expected to drop 8.5 per cent this year to 288,225 in the biggest fall since the 2008 financial crisis, the Centre for Economics and Business Research found.
CEBR economist Rob Harbron said the job cuts come after three years of very low productivity in the financial sector, as employers have held on to under-utilised staff in anticipation of an uptick in their business.
But with concerns mounting over future economic growth in the UK and Eurozone, institutions are now cutting out the slack in their headcount, he told City A.M.
The job losses are likely to slash London’s 2011 GDP growth to less than a quarter of historic levels this year, while the loss of tax revenue is certain to hurt the Treasury.
“A large part of City bonuses has gone to the taxman, so with job losses there will be a drop in incomes and it is really the taxman that loses out,” Harbron said.
Meanwhile Bank of England policymaker Robert Jenkins yesterday said he had “great concerns” over the salaries and benefits paid to bankers.