Financial services sector sees drop-off in employee rate

The number of employees in the financial services sector fell at the fastest rate for five years over the past quarter, new research has revealed.

A survey of 79 firms conducted by the Confederation of British Industry (CBI) and PricewaterhouseCoopers LLP found that a quarter of respondents said they had cut jobs over the past three months, the highest rate since March 2003.

A host of big name city banks including, Lehman Brothers Citigroup, Bank of America, UBS and Merrill Lynch have been hit by the sub-prime 'credit crunch'.

And expectations for employment over the next few months was at its weakest since December 2002, according to the CBI.

The employers' organisation's quarterly survey of the sector found that most companies fear the credit squeeze will get worse over the coming six months. Nine in 10 respondents believe the squeeze will last longer than six months, compared with 70% last quarter.

Ian McCafferty, chief economist at the CBI, said: "It is clear that the credit crunch has worsened over the first three months of this year. The interbank markets have become more gummed up, with banks even more unwilling to lend, and credit spreads have widened.

"We can expect further tough times in the financial sector, and as this feeds through into the wider economy it will inevitably be felt through slower economic growth this year and next," McCafferty said.