Bank move sparks job loss fears

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The Government-approved £12 billion takeover, which values HBOS at a fraction of its worth six months ago, will create a "mega-bank" with nearly a third of the UK mortgage market and more than £300 billion of deposits.

It will also have around 3,000 branches, leapfrogging industry titan Royal Bank of Scotland's 2,300 sites and dwarfing HSBC, which has around half.

The announcement came on yet another dramatic day for the markets which saw a £100 billion liquidity injection from the world's central banks, and fears mounting over the future of embattled US investment bank Morgan Stanley. Its share price fell again heavily and has nearly halved during the past week.

Prime Minister Gordon Brown, who gave the Lloyds TSB-HBOS deal competition clearance during a meeting with Lloyds TSB chairman Sir Victor Blank on Monday, said the deal was needed to help shore up the UK financial system. HBOS suffered a run on its shares this week as fears over its funding position grew in the wake of Monday's collapse of US investment bank Lehman Brothers.

But the Lloyds TSB-HBOS tie-up has prompted fears for thousands of the 145,000 staff employed by both firms, with promises from Lloyds of "significant cost savings" when the networks are combined.

There is speculation that as many as 40,000 job losses could follow, although this figure was described as being "on the high side" by Lloyds TSB boss Eric Daniels. HBOS employs 75,000 people and has 1,100 branches in the UK. Lloyds TSB has around 70,000 staff, with 1,900 branches.

Banking analyst James Hamilton said an estimated £1 billion in annual cost savings forecast from the deal could double "given that there is almost complete geographic and product overlap and you do not need two branches on every high street".

He also warned that consumers could see less choice as a result of the tie-up.

"We expect the deal to dramatically reduce competition for almost every product line in UK financial services so increasing the long-term profitability."