The Centre for Economics and Business Research reckons that 6,500 people could get the chop in the coming months, with most of the casualties coming in private equity, investment banking and hedge funds – the three areas of the financial market that have profited most from the boom of recent years.
It also says that bonuses could fall by 16% to £7.4bn ($15bn) in 2007, compared to last year’s record £8.8bn total – less than the 25% drop it was originally predicting, but still enough to sting a bit.
On the other hand, a bit of perspective is probably necessary. £7.4bn will still buy a lot of yachts and Ferraris. And the job losses – while not much fun for those concerned – need to be viewed in the context of the record 11,000 jobs the City is likely to create for the whole year. There are now almost 350,000 people employed in the City, so the cuts will account for less than 2% of this total.
The CEBR could also be wrong. At the start of this year, it thought that just 4,000 City jobs would be created this year, so its recent track record is more Mystic Meg than Nostradamus.
And even if it is not wrong, the pain is likely to be temporary – the bearish think-tank reckons jobs and bonuses will be hitting record levels again by 2009 and 2010.
Whatever your opinion of these highly-paid banking execs – who are never likely to win many popularity contests with the general public – the City has been the driving force behind the recent growth of the UK economy. So its continued good health is probably in all of our interests.