London will lose nearly 20,000 financial services jobs over the next three years, a report predicts today. The City will bear the brunt, with 10,000 jobs set to be axed, while another 9000 will go in Tower Hamlets - home to Canary Wharf - and Westminster, which hosts scores of hedge funds in Mayfair and St James's as well as thousands of media and marketing firms, lawyers and corporate headquarters.

Across Britain, a total of 40,000 financial services jobs will go, credit-checking firm Experian says.

While the number is undoubtedly enormous, it is less cataclysmic than some other predictions. JPMorgan has estimated that 40,000 financial jobs could be lost in London alone.

"Financial services jobs are particularly vulnerable as the fallout from the credit crunch continues," William Thomson, director of international economics at Experian, says in the report.

"The slowdown will bring the impressive run of job creation to a halt."

Banks and securities firms worldwide have already cut about 65,000 jobs in the subprime mortgage market meltdown.

Tighter credit markets in the wake of the crisis mean that overall employment in the UK will fall for the first time since 1992, Experian says.

The squeeze on jobs and growth will narrow the economic growth gap between the South-East and the rest of the country for the first time since 2002, the report suggest.

Londoners will also see their productivity rate, known as gross value added (GVA), grow more slowly as fewer deals get done.

The capital's average production per person will fall to 1.5% growth in 2009 down from 2.3% in 2008. That will see it come down to levels similar to those of the rest of the UK.

Experian also forecast that house prices in the UK would fall by 7.6% over the next two years.

In the South-East and East, prices will fall 5% by the middle of 2010, while in the West Midlands and South-West they will tumble 10%.

The report comes among predictions that City workers who keep their jobs will see bonuses slashed by 40% from last year's bumper payout.

In its biannual report on London's economy, the Centre for Economics and Business Research (CEBR) says there will be a 2008 bonus pool of £5.07 billion, down from the near-record £8.51 billion last year. The CEBR said bonuses would not recover to previous highs until 2011.

"Don't expect City bonuses to bounce back. There is a strong perception that bankers have been rewarded for getting it wrong," managing economist Dominic Walley said.

A report from pay experts Income Data Services showed the wages picture across the country seems less bleak.

It found a slight increase in pay awards last month, with rises of 3.8% in the three months to April compared with 3.5% in the three months to March.