T 5,000 fewer jobs than expected will be created in the City this year as government proposals to introduce a permanent immigration cap, the 50p tax rate and regulatory uncertainty force investment banks to put the brakes on hiring.
Economic consultancy the Centre for Economic and Business Research (CEBR), which tracks financial services recruitment, yesterday slashed its forecast for the number of jobs created in the City in 2010 by a third from 14,000 to 9,600, while forecasting dire prospects for 2011 saying only 2,700 new jobs would be created.
It expects the average number of people working in the sector in Britain to increase from 305,000 to 315,000 this year, rising to 318,000 in 2011. This is a significant downgrade from just six months earlier when it forecast that the average number of people working in the sector would rise to 319,000 this year and 327,000 next year.
The group said the coalition government’s increasingly “anti-business” proposals were forcing some of the City’s biggest players to freeze recruitment.
“There was a lot of talk from the coalition government when it first came to power about how Britain was open for business again but a lot of businesses are quite concerned about the measures that are potentially about to be brought in because they are going to make it much harder to do business in the UK in the future,” said Scott Corfe, economist at the CEBR.
Corfe said the biggest concern of legal, business services and investment companies was the immigration cap, introduced in July, which limits the number of skilled workers entering the UK from outside of the European Union to 24,100. Due to be made permanent next April, critics of the cap say it means companies will not be able to bring in enough skilled workers to carry out vital functions that help them grow their business.
The CEBR says together with the 50 per cent tax on higher earnings and regulatory uncertainty, businesses could be forced to move abroad.
JP Morgan Chase, Deutsche Bank and PricewaterhouseCoopers (PwC) have all expressed concerns about the immigration cap. PwC warned recently that businesses were “struggling to operate” and having to put projects on hold. A Treasury spokesperson said the government was committed to ensuring the City “remains a competitive location for financial services” but that also meant reducing “the systemic risk the financial services sector poses to the wider economy.”