The City of London financial district is to shed 21,000 jobs by next year as investment banks tighten their belts in the face of plummeting share values and dwindling business volumes, a new study has forecast.

The Centre for Economics and Business Research (CEBR), a London-based consultancy, said it expects the City workforce to fall to about 313,000 by 2003, a level last seen in 1997-98.

CEBR's latest job loss estimate is up on the 17,000 City redundancies it predicted last year.

Job losses in the City of London have a disproportionate economic impact because of the above average salaries commanded by City workers.

Hefty annual bonus payments to investment banking staff are thought to be a major factor underlying the boom in London property prices during the equity bull market of the 1990s.

Bloodletting

The CEBR study comes amid news of job losses at several City banks.

UBS Warburg sacked 200 staff earlier this month, while Deutsche Bank cut nearly 400 US and European jobs in May.

The Financial Times has estimated that British banks shed up to 25,000 jobs last year.

However, investment banks are now believed to be getting rid of senior staff, in contrast to an initial round of redundancies last year which mainly affected junior employees.

Most financial institutions held off cutting jobs at the start of the recent economic downturn because they feared they would be left short-staffed in the event of a sudden turnaround.

Recession

An unexpectedly quick rebound from the 1997-98 emerging markets crisis forced many banks to launch an expensive re-hiring campaign.

The CEBR said the latest round of City redundancies is mild compared with the jobs cull that took place in the square mile during the recession of the early 1990s.

The consultancy said the City workforce fell by nearly 45,000 to just 218,400 between 1989 and 1992.