Half a million financial services jobs on the line

Published on Wednesday 11 February 2009 20:32

BRITAIN'S financial services sector will have lost a staggering 570,000 jobs before the recession runs its course, according to one of the gloomiest forecasts yet for the UK economy.

Analysts at Business Monitor International (BMI), the forecasting and country risk specialist, also predict a 3.5 per cent slump in UK GDP during 2009 – far worse than a recently-revised forecast from the International Monetary Fund.

Overall, the number of people out of work in the UK will peak at 3.2 million next year, BMI warned, an unemployment rate of more than 11 per cent.

That compares with yesterday's revelation that unemployment had reached a ten-year high of just under two million.

The report by London-based BMI, entitled Britain on the Brink, suggested that the financial services sector will bear the brunt of the downturn.

Researchers estimate that some 569,000 posts will have been lost between the second half of 2008 and the end of next year, taking employment in the sector down to just over six million.

There was no regional breakdown but the forecast would point to sweeping job cuts in London where thousands of posts have already been axed by banks and financial services companies.

North of the Border there are an estimated 100,000 people directly employed in financial services. A further 100,000 or so work in support areas including law and accountancy.

Commenting on the report, Owen Kelly, chief executive of Scottish Financial Enterprise, said: "All predictions at this time of extreme volatility have to be treated with caution.

"The skills, expertise and diversity of Scotland's financial services industry should make us guardedly positive for the long term."

BMI said the overall unemployment rate was unlikely to retreat to last year's lows "for at least another five years".

"Some of these jobs, including many in financial services, will not come back anytime soon," it added.

Echoing the IMF, BMI said the UK was facing its "most significant" economic crisis since the Second World War.

The group warned of an "unprecedented" fall in the country's economic world ranking.

Using GDP per capita as a measure, the UK is set to tumble nine places, from 12th position in 2007 to 21st next year. That would place it behind Italy, Australia and Canada

The research was published as Bank of England Governor Mervyn King admitted the UK was in "deep recession" and warned that policymakers may soon have to resort to other rescue measures as interest rate cuts lose their impact.