6,000 City workers may lose jobs in wake of credit crunch

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The Centre for Economic and Business Research (CEBR) consultancy predicted more than 6,000 job cuts in the City, while bonus payments are also expected to be slashed.

It came as Chancellor Alistair Darling warned of a sharp slowdown in economic growth next year.

The grim outlook follows three months of financial turmoil which has seen lending between banks dry up.

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City workers could see bonuses fall by as much as 25 per cent, says one expert

The so-called credit crunch, which was sparked by the collapse of the subprime mortgage market in the US, has slammed the brakes on private equity takeover deals and led to a major downturn in profits at investment banks.

Queues of customers withdrawing cash from Northern Rock further dented confidence in the City where workers are braced for job losses before Christmas.

Jonathan Said, senior economist at the CEBR, said: "We expect to see weaker economic data seep into the market and that could trigger more job losses."

UBS this week said it planned to axe 1,500 investment banking jobs in London and New York after its first quarterly loss in nine years. Morgan Stanley is also cutting about 600 staff while Lehman Brothers sacked 2,500 around the world over the summer.

Matthew Osborne, a partner at headhunter Armstrong International, said more job cuts will follow unless conditions improve. "We are predicting job cuts in fixed income before the bonus round," he said.

According to Jonathan Evans, headhunter for investment banks and managing director of Sammons Associates, even top performing City workers could see bonuses fall by as much as 25 per cent this year.

"The bonus this year will be keeping your job," said one banker.