London Finance Firms to Cut Fewer Jobs Than Forecast, CEBR Says

By Kevin Crowley

Oct. 15 (Bloomberg) -- U.K. financial services firms will cut fewer jobs this year than previously forecast after the economy rebounded, according to the Centre for Economics & Business Research Ltd.

Banks, insurers and asset managers in London may eliminate 18,000 positions this year, the CEBR said in a report today, paring its April forecast of 29,000 cuts by more than a third.

“The reason for the upward revision to 2009 is the unexpected speed with which the economy has turned the corner,” the CEBR said. “Many banks are now reporting healthy profits.”

JPMorgan Chase & Co., which has its European headquarters in London, yesterday reported its biggest profit since the subprime mortgage market collapsed in 2007. The U.K.’s benchmark FTSE 100 index has gained 50 percent from its low in March. U.K. unemployment rose by the least in a year in the three months through August, the Office for National Statistics.

Mergers advisers and derivatives traders still face deepest cuts this year amid a dearth of takeovers and demand for “complex” products, the CEBR said. The number of jobs in mergers has dropped 42 percent from its 2007 peak, and the number in derivatives has fallen 31 percent, the CEBR said.

In all, the total of people employed in London’s financial services industry will start rising next year, and is likely to reach 325,000 in 2012. That’s still 8.2 percent below the record reached in 2007. Employment in the industry won’t return to that level for at least a decade as governments step up oversight of the industry, the CEBR said.

Tougher Requirements

“Re-regulation of London’s wholesale financial services sector will act to limit its economic activity over the medium term,” said Benjamin Williamson, a CEBR economist who helped compile the report. “Growth is likely to remain below recent levels owing to tougher capital requirements and lower yields reducing firms’ profits.”

Lobby groups including the Association of British Insurers, the British Bankers’ Association and the City of London Corporation have warned that excessive regulation of the city’s financial markets may slow recovery. Legislators are seeking to boost oversight to prevent a repeat of the credit crisis.

To contact the reporter on this story: Kevin Crowley in London at kcrowley1@bloomberg.net