Bankers for super-rich looking to ride out storm

But in one corner, the picture doesn't look so bleak - at least not yet. The refined world of private banking and wealth management is booming. Barclays Wealth, Britain's biggest private banker, is creating 800 jobs globally. Others, such as UBS wealth management, say they are actively recruiting. David Butters of recruitment firm GRS says: "The growth in wealth management has surpassed any other sector and 95% of these roles are newly created."

It is hard to believe private banking won't be affected if there is a recession. But the immediate outlook appears rosy. The main reason is simple: The rich have got richer. The wealth of high net worth individuals (HNWIs) with over $1 million leapt 11.4% in the last year, according to Merrill Lynch/Cap Gemini. The growth in private banking is not just down to the mega-rich coming here because of generous rules on non-domiciled status. There has also been a surge in the number of Britons who have made millions in everything from private equity to the internet.

"The creation of wealth from the entrepreneurial sector has never grown at this pace," says Mark Kibblewhite, UK managing director at Barclays Wealth. "The throwing-off of capital is monstrous."

That raises a second issue. Not so long ago wealth management was associated with little more than having a swish grey chequebook and a banker in a morning suit.

But where once inherited wealth and mature investors dominated, now the client base has expanded rapidly - from barristers to footballers. The number of female clients is soaring, too. These new customers have demanded more sophisticated products and services, from fixed income to hedge funds. The banks have also become more pro-active, courting would-be clients earlier, when they start up a business or before they reach board level. Kleinwort Benson, for example, woos clients in its private dining room on the top floor of its Gresham Street HQ, with cooks imported from top restaurants such as St Alban.

This story is not just about London either. Private banks have been setting up offices in a score of towns around Britain - Coutts opened in Reading and Chelmsford in the past fortnight; Kleinworts in Leeds last month. Bear in mind that as a rule of thumb a client must have £500,000 in investible assets. No wonder Perry Littleboy, marketing director of Coutt's, calls it "the democratisation of wealth in Britain".

There are other reasons why banks are keen on wealth management. With investment banking feeling severe pain, the steady world of private banking suddenly looks more attractive - UBS generated something in the region of 55% of global profits from wealth management last year.

Big banks also see an opportunity for growth. The top five UK private banking arms have about 14% market share. In contrast, the top five investment banking houses have something like 34%.

However, bigger may not always be better. James Anderson, who publishes an annual overview of the industry called the Private Asset Managers' Directory, says: "Wealthy successful people want to feel part of something special which other people can't get access to." The risk is that a big institution won't make the client feel special. For that reason, he argues, wealth management may not see further consolidation. Government plans to penalise non-doms could also drive some HNWIs away.

But the big question is: can private banking ride out the storm if the economy slumps? Wealth managers pride themselves on their long-term outlook and point to the diversified nature of their clients, plenty of whom don't work in the City. Indeed, Martin Heale, London head of private wealth management at Kleinwort, expects "a spike in business as a secondary fallout from the credit crunch", with many HNWIs changing jobs and careers and others ready to invest quickly in new assets.

There is a caveat: it all depends on how bad the credit crunch gets.