It’s looking grim for lots of pinstriped City folk, as news emerges that giant US investment bank Goldman Sachs – which has actually survived the credit crunch relatively unscathed – is planning to get rid of lots of its bankers, according to the FT. And with Citigroup also ready to do the same, as it looks to shed about 10% of its workforce, the City is now worried that other rivals will be emboldened to follow suit – meaning that the Square Mile may soon be teeming with unhappy-looking bankers wondering where their next school fees cheque is going to come from.
Citigroup’s problems have been well documented – in the wake of its huge sub-prime losses, new boss Vikram Pandit has already said he wants to lose about 10% of Citi’s 65,000-strong investment banking workforce, in a bid to trim $15bn off its cost line. According to the Wall Street Journal, this is likely to mean entire trading desks and dozens of senior MDs getting their marching orders – some have already gone, and lots more are likely to get the boot this week.
But the FT also reports that Goldman launched another round of cuts last week, as it attempts to trim its advisory and fundraising departments by about 10% (although naturally it hasn't admitted this publicly - it's not exactly forthcoming at the best of times). And that’s on top of the 5% who get the chop every year for coming out bottom in the annual performance review (they don’t mess about at Goldman). Given that its second quarter results were actually pretty good – or at least, the 11% drop in profits was better than everyone was expecting – this raises the inevitable question: if they need to get rid of this many people, how bad must things be at some of their rivals?
So far most banks have been pretty tight-lipped about possible redundancies, but there has to be a good chance that they’ll use this as a handy excuse to wield the axe without losing too much face. That’s certainly the opinion of the Centre for Economics and Business Research, which is predicting 11,000 job losses in London this year and another 8,200 next year. Some of these staff may be relocated to the Middle East and Asia, where (not surprisingly given the oil price) business is still booming, but the rest will be left high and dry.
However, we suspect sympathy might be in short supply. After all, many of these bankers have made an awful lot of money from the recent boom years – and some will have played their part in bringing about the eventual bust. So if these high fliers are now brought crashing down to earth, there’ll probably be few tears shed among the general populace.
And at least they'll have plenty of free time to watch Wimbledon...