Bankers may not need to join the queues of jobless benefits claimants – already stretching towards 1m in the UK. But plenty face unemployment. The Centre for Economics and Business Research forecasts that the City of London will shed 28,000 jobs this year, and 34,000 next. That will shrink the City’s workforce by 17 per cent – back to its 1998 level of 291,000. City bonuses, the CEBR estimates, will sag from £8.5bn in 2007 to £3.6bn this year, and £2.7bn in 2009.

The Big Apple will be crunched too. New York state and city officials now forecast that Wall Street will lose 35,000-40,000 jobs by 2010. That will hit public finances. The 177,000-strong securities industry contributes nearly a quarter of NYC wages, and 20 per cent of state revenues. Officials estimate Wall Street bonuses will slide 43 per cent to $27.5bn this year.

In the UK, the pre-eminence of financial services means its woes will hit the entire economy. This is not just a City downturn. On top of job losses at nationalised Northern Rock and Bradford & Bingley, the Lloyds TSB/HBOS merger will bring thousands more. This will affect less London’s Cristal-swigging investment bankers than employees at branches and call centres across Britain.

The rise of UK finance, moreover, has done more than just drive up house prices and levels of racehorse ownership in the south-east of England. Smithers & Co argues that the financial sector’s 13 per cent annual expansion since 1992 has turbocharged overall growth. Had the sector grown in line with the rest of the economy, economic growth would have averaged 1.7 per cent a year, not 2.7.

Financial services’ low capital output ratio means growth has been achieved with comparatively modest levels of fixed investment. If financial growth slows, the economy will need higher investment in manufacturing and exports. But for most M&A bankers, whether in London or New York, it may be too late to retrain as engineers.

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