The City of London feels the squeeze

Credit Crunch will Erase North/South Divide

09-May-2008, Writes Dan Drage dan.drage@consumerchoices.co.uk

A significant by-product of the credit crunch will be the gradual eradication of the north/south growth divide in the UK.

According to a report by Experian, the UK credit checking agency, the north/south growth divide will close for the first time in six years as the credit crunch takes its toll on City of London workers.

Forecasters predict city bonuses will fall by 40% this year.

Investment banks that have suffered billions in losses on mortgage-backed investments hit by the crunch have begun to cut thousands of staff. Citigroup is shedding 9,000 jobs, Merrill Lynch 4,000, and Swiss bank UBS has announced cuts of 5,500 staff.

The south has been growing 1% a year faster than the north but this will change over the next couple of years as the credit crisis and consumer slowdown take their toll, especially on financial and business services.

William Thomson, Director of international economics at Experian, had the following to say:

‘The City of London will bear the brunt of the job losses in the capital, with firms expected to shed 10,000 jobs. Westminster and Tower Hamlets will also see lower financial services employment’

He continues:

‘The slowdown will bring the impressive run of job creation to a halt, with UK employment levels set to fall next year for the first time since 1992.’

Chris Eagle, Commercial Manager at Credit Choices, urges a prudent approach:

‘In light of pessimistic predictions regarding the economic climate in 2009 and 2010, it may be a good idea to get a high interest paying savings account, and start planning prudently for the future. The Icesave (www.icesave.co.uk) fixed rate account is a great place to start; offering as it does a whopping 7.01% interest to savers.’