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City losing 300 jobs a week as credit crunch takes hold
Gideon Spanier, Evening Standard13 May 2008
The global credit crunch is claiming more than 300 jobs a week in the City.
Some of the highest-paid executives in the Square Mile and Canary Wharf have been sacked as the world's financial markets go into paralysis.
A total of 6,500 people will be axed by next month but more than 4,000 have already gone, according to analysis by the Evening Standard.
Junior staff have been casually dismissed in the office lift and whole trading departments have been "black bagged" - told to clear their desks and marched out by security.
Top executives such as £1-million-a-year Barclays boss Edward Cahill have also been hit by the most dramatic job cull in decades.
The bloodletting began in earnest in December when global giants such as Citigroup lost billions on bad mortgage debts in America.
Thousands of jobs were lost as companies frantically reduced their workforces, dismissing everyone from heads of department down to junior traders.
Now the second wave is beginning to bite amid the renewed fallout from the US sub-prime crisis. People working in complex types of debt related to sub prime, such as Mr Cahill - in charge of "collateralised debt obligations" - were among the first to go.
The chaos was triggered when American homebuyers with poor credit histories defaulted on their home loans.
Yesterday, HSBC was forced to write off another £1.3billion in bad debts on top of £6.1billion last year.
Recruitment expert Jonathan Evans of Sammons Associates said: "The situation is definitely worse than after the dotcom bubble of 2001. Most investment banks operate on a knee-jerk basis."
Many of the current casualties are among the City's army of "twentysomething" work-ers earning basic salaries of up to £120,000 - a sum that can easily double with bonuses.
There has been a general policy of last-in-first-out, such as the case of Charlie Roast, who was hired as an executive by Merrill Lynch from Deutsche Bank a year ago and touted as a hotshot only to be ditched last week.
One managing director at JPMorgan said: "The mood is pretty bad - no one really knows what is going to happen.
"Last year, when the credit crunch began, we still knew we were going to get decent bonuses because overall 2007 had been okay.
"This year everyone knows it's going to be terrible. What I fear is working until November and then being laid off, just before bonuses are due."
Figures compiled by the Standard - from company announcements and major banks - show that Citigroup has cut 1,500 jobs since October.
This is more than 12 per cent of its London workforce. The bank swung the axe after being forced to admit it had lost more than £20billion on sub-prime investments.
Swiss bank UBS has slashed 800 of its workers and Merrill Lynch has cut a total of 600 since October.
At least 800 bankers and backroom staff at the London offices of Bear Stearns - 60 per cent of the workforce - also face the sack in the next two months as accountants from JPMorgan take over.
Bank bosses are refusing to reveal publicly exactly where the cuts will fall in a bid to shore up confidence. Much of the current cull has been sector-specific. Staff involved with industries that are particularly struggling have been facing mass cuts.
Deutsche is said to have axed dozens of people in its departments specialising in retail, real estate and consumer goods.
Those fortunate enough to be in less-affected areas, such as pharmaceuticals, utilities and energy, have escaped the axe.
Richard Snook, economist at the Centre for Economics and Business Research, said: "Investment banking and mergers and acquisitions [takeover deals] are clearly the worst off. These are not just the credit crunch but the end of the five-year bull run on the stock market that we've had."
Amid the misery there are signs that the worst may be over.
A former Merrill Lynch banker, who was axed last autumn but recently found a new job in the City, said: "It has been very barren for six months but the employment market has begun to pick up a little in the last month.
"All these banks with bad credit products can't just forget about them - they have to have people to manage them, so they are hiring discreetly again."
• London's largest law firms are also cutting back on recruitment of junior lawyers. The slowdown comes amid concerns that debt finance and corporate takeover work is drying up. An expected surge in corporate litigation resulting from the credit crunch has also failed to materialise.
