These are the findings of the latest issue of London and the City prospects, a regular publication to be released on Monday 19 October 2009 by the Centre for Economics and Business Research (CEBR) — one of the United Kingdom's leading economic consultancies and respected commentators on the capital’s economic trends.

“We estimate that the financial crisis cost 30,000 wholesale finance jobs in 2008; a further 18,000 will have been lost over the course of 2009 as containment operations are put into effect. Two of the worst hit sectors have been derivatives and investment banking with job numbers declining by around 31 per cent and 29 per cent from peak respectively as demand for complex products dried up. Merger and acquisition related corporate finance jobs have been hit even harder declining by around 42 per cent from 2007 levels.”

“In our forecasts for 2009 produced in April, we predicted a greater total loss with 29,000 fewer wholesale finance jobs this year. The reason for the upward revision to 2009 is the unexpected speed with which the economy has turned the corner. Many banks are now reporting healthy profits and interest rate spreads have fallen considerably. The FTSE has also shown a marked improvement over the last six months posting its largest ever quarterly gain in the third quarter.”

“However, we are not out of the woods just yet. The Bank of England will need to maintain its loose monetary policy stance for some time ‐ in part to counter the fiscal drag on economic growth produced by a sharp public sector correction over the coming years.”

“A sluggish recovery and a lower rate of job creation mean employment in the City will take time to return to pre‐recession levels. Looking forward our forecast for the medium term is that the City job numbers will gradually recover from 2010 and rise to 325,000 in 2012. This is still well short of the 354,000 in 2007. Under our central scenario, wholesale financial services employment in London is not expected to return to 2007 levels until 2021. We expect to see a more cautious City rise from the embers with tougher regulation that sets limits to its growth.”

Benjamin Williamson, economist at CEBR and one of the report’s authors, commented:

‘Re‐regulation of London’s wholesale financial services sector will act to limit its economic activity over the medium term. Whilst the City is still expected to retain its position as one of the world’s leading financial centres, growth is likely to remain below recent levels owing to tougher capital requirements and lower yields reducing firms’ profits. This means a diminished rate of job creation with employment in the City not expected to return to peak levels for over a decade.’