Bloody day in the City: 1,300 jobs axed

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Bankers suffering in the credit crunch were also prepared for the figure to double tomorrow.

UBS announced it would cut 900 staff at its Liverpool Street headquarters by June and Merrill Lynch said it would shed 4,000 jobs worldwide. Sources said that up to 400 of its 4,500 London staff would go.

Employees of Citigroup, the world's biggest bank, are now preparing for the axe as sources said it was likely to lay off 1,000 London staff when its first quarter results are published tomorrow. The cuts are the first confirmation of the scale of the job losses facing the City, estimated this week at 40,000 by JP Morgan - more than one in 10 of all workers.

It will fuel mounting fears of a recession, led by a City downturn. Commentator David Buik of BGC Partners said: "The job cuts were inevitable and more banks will follow suit, starting with Citigroup tomorrow.

"Merrill's figures were worse than expected. People are now immune to the numbers because they know there is worse to come."

Chancellor Alistair Darling was today finalising details of a package aimed at averting the threat of a downturn by unblocking the money markets.

The key plank of the plan is an attempt to tackle the freeze in interbank lending by accepting mortgage-backed securities in exchange for government-backed bonds.

The move, if successful, would allow banks to borrow money from each other more easily, opening the way for the deals, on which the City depends, getting back on track.