Brown reassures the City: Success is still a priority

He promised a Square Mile audience that criticism of bonuses and banking practices did not mean the financial sector had fallen in importance. "I don't need to tell anyone here about the centrality of the banking system to everything we do as a nation," he said.

Mr Brown also said the near-nationalisation of three banks would not be allowed to undermine London's edge. "We will do nothing to damage London's international competitiveness. Our aim is to boost London as a financial centre and I'm determined to do everything to sustain London's place as one of the world's leading financial centres."

He also urged world leaders to copy their forebears who rewrote the global rulebook after the Second World War at the 1944 Bretton Woods conference, which created the International Monetary Fund. Calling for a special summit to devise modern rules, he said: "This cannot be a short-term rescue to paper over the cracks. Only a surgical approach that gets to the root of the problem will now work."

Mr Brown said today's historic announcements were difficult but necessary. "It is because we — the Government and the City working together — are prepared to take this difficult decision now that I believe the City of London as a financial centre will be stronger for the future.".

Leaders of the 15 Eurozone countries yesterday agreed a rescue package for major banks, agreeing to guarantee loans between them until the end of next year and to allow individual states to boost the capital of struggling institutions by buying preference shares.

Bank of England interest rate setter Andrew Sentance said Britain was already in recession and warned of mass job cuts in the coming months.
"It now seems more likely than not that we will see a fall in gross domestic product for the third and fourth quarters of this year, satisfying the technical criteria which many economists use to define a recession," he said.

Dr Sentance said figures published tomorrow were likely to show inflation heading towards five per cent. But he forecast it to drop back towards the two per cent target, paving the way for further falls in interest rates.

The respected Centre for Economics and Business Research consultancy said that with Britain facing its worst financial crisis for more than 70 years, 28,000 City workers will lose their jobs this year and a further 34,000 next year.

A study by Ernst and Young shows British companies issued 111 profit warnings in the third quarter of this year — the highest total since 2001. Andrew Wollaston, from the accountants, said: "UK plc is about to enter the perfect storm due to the confluence of the financial credit crunch and economic downturn. If not already, we are likely to be in recession by Christmas."
Further problems are expected to be highlighted this week with the Office for National Statistics publishing jobless figures on Wednesday and the British Retail Consortium releasing high street sales statistics tomorrow.