Turmoil 'may cost 6,500 City jobs'

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Experts at the Centre for Economics and Business Research (CEBR) warned that tighter debt markets, fewer private equity deals and the Northern Rock crisis could see thousands of workers lose their jobs following four years of rapid growth.

The CEBR said most of the job cuts would be seen in the investment banking sector, which would shed about 2,300 positions next year, while the fund management sector is expected to reduce its headcount by some 1,600.

With fewer stock market launches on the cards amid unsettled equity markets, more traditional City sectors such as securities are expected to axe about 1,200 jobs.

Some 700 positions within the derivatives and foreign exchange sectors are set to go, amid faltering appetites for credit derivatives.

The cuts follow a record rise in City jobs after 11,000 new jobs were added this year following the rapid growth in the financial services sector in the first half of 2007.

CEBR economist Sarah Bloomfield said: "What we are likely to see as we enter 2008 is a reduction of almost one for every two jobs added this year.

"But although this equates to a reduction in total jobs of only 2%, it will feel worse than it actually is because the City has become used to adding jobs at breakneck speed."

The CEBR report suggested that the job losses will be short-lived, with most sectors returning to jobs growth in 2009 as the US economy and financial markets recover.