Banking and finance - More jobs to go in banking sector.

(From Financial Director)

Byline: Jules Stewart.

Given the rate of staff cuts in the investment banking industry, one might be forgiven for wondering if there will be anybody around to answer the telephone when the markets finally stage their long-anticipated recovery.

Banks have an almost pathological aversion to looking beyond the top of the curve. So it was in the halcyon days, from 1996 to 2000, when the capital markets were on a roll and investment banks worldwide added more than 100,000 people to the payroll, bringing the total headcount up to around 627,000. This is without taking into account the mega-mergers put together during this period, such as UBS and SBC Warburg, JP Morgan and Chase, and Deutsche Bank and BT Alex Brown. "When faced with such over-capacity in the past, investment banking firms have often resorted to mergers and acquisitions," says Ray Soifer, head of Soifer Consulting.

The investment banks of Wall Street, the City, Frankfurt and Zurich are all undergoing a painful process of adjustment from the glory days, when even eight-figure bonuses could not keep up with income growth. By the end of 2001 the joyride was well and truly over. Total numbers had plummeted to 593,000, with Merrill Lynch axing 20% of its workforce, while Goldman Sachs and Lehman Brothers sacked 9% and 5% of their bankers, respectively, and Morgan Stanley lost nearly 10% of its global workforce. For the overall market, the industry has shed at least 12% of its workforce since 2000 and, as Soifer points out, the bloodbath is far from over.

The Centre for Economics and Business Research adds its voice to the gloomy forecasts. It estimates another 20,000 job losses in the City by the year-end - this is after a reduction of 18,000 since 2001. The think tank fears another 58,000 jobs may have to go in London over the next few years, at least until the recovery is consolidated.

"While US securities firms have cut more than 30,000 jobs since the end of 2000, and comparable numbers are expected in London by mid-2003, operating figures show that far larger cuts may well be ahead," says Soifer.