Impending job loss rate will be worse than the dot com crash, the Centre for Economics and Business Research (CEBR) has bleakly predicted as it revised figures in the shadow of financial slowdown.
CIOs could be placed under pressure to cut their head count and outsource, according to the latest forecast from the CEBR. The research organisation is predicting a slow down with higher redundancies than the dot com crash.
CEBR predicts there will be 20,000 jobs cut over the next two years in London's financial-services industry as a result of the current credit crunch.
Recent cuts at Citi and Royal Bank of Scotland (RBS) are “the tip of the iceberg as the substantially weaker outlook for the City over the next two years will necessitate further lay offs," said Dominic Walley, senior economist at CEBR.
Walley told CIO.co.uk that he has already seen recruitment freezes and cost cutting. "There is just not the money available to maintain projects or start new investments programmes, there is a widespread shakeout of costs." CIOs in financial institutions are being told to cut costs drastically he said.
CEBR predicts the financial sector jobs will drop by 11,000 this year and lose a further 8,200 next year. As a result jobs in industries reliant on the financial sector are also likely to be hit.
“We expect the credit crunch to have a greater impact on the City than the dot com crash when 15,300 jobs were lost,” said Walley.
CEBR believes corporate finance, investment banking and derivatives will feel the brunt of the slowdown. These have been hit by asset write-downs, weak equity markets and the credit crunch. “There is little sign of light at the end of the tunnel for the City,” said Walley.
Today’s announcement from CEBR is a revision of findings from October 2007, when it predicted jobs would only decline by 6,500 jobs this year.
"Unlike 2000 and 2001 other areas of the economy such as the housing market and consumer spending will not be as supportive of growth during this crisis," the group said. Walley said the “magnitude” of the credit crunch “has forced us to revise our forecast”.
Merger and acquisition activity is also likely to drop according to CEBR, dropping by 26 percent and the London Stock Exchange will see its trading volume drop by 36 percent it predicts.
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