London will lose about 194,000 jobs in the next two years because of the financial crisis, fresh research suggests.

The City and Tower Hamlets, home to Canary Wharf, will be hit hardest with 40,000 jobs lost, says Oxford Economics. The capital is set for more pain than anywhere else in the country, with 97,000 jobs lost next year and a similar number in 2010.

Oxford Economics adds that the London jobs total will fall to about 4.5 million from 4.7 million now.

"The escalation of the credit crunch will drive a rapid deterioration in employment prospects over the coming year," the report says. "Financial services will see the deepest job cuts, with losses in the region of 40,000 forecast [in 2009], but most other sectors will be affected."

The City will lose more than 35,000 jobs, a decline of more than 10%, and Tower Hamlets will see more than 18,000 jobs go over the next two years.

More than 39,000 new financial services jobs have been created in Tower Hamlets since the start of this decade.

Retail will be the next hardest hit, the consultancy says, but the only sector to avoid jobs losses will be the public sector.

The capital is also likely to see far fewer migrants. They have averaged 76,000 a year recently on the lure of jobs.