Big job cuts feared in the City

CITY job fears are rising again with the first quarter of the year looking set to be a disaster. While stock market prices have rebounded, takeover work remains flat. Deals involving quoted UK companies have totalled just £350m so far this year, City analyses reveal. In the first quarter of 2001, they were £4bn.

The gloom is spreading from investment banks' battered equity divisions to their debt operations. Figures maintained by one top City bank show European-wide bond issuance by financial institutions has slumped £6bn from a year ago. Issuance by non-financial companies is well below the £40bn forecast.

'A lot of people are expecting further cutbacks after first-quarter results,' said a source. 'Everyone was expecting a huge pipeline because of the lack of issuance at the end of last year. It hasn't happened.'

Last week, idle dealers kept themselves occupied watching the bizarre auction of Enron Europe's office furniture online. It is the Enron fallout and deepening telecoms slump which have hammered confidence hardest. Debt downgrades are running at record levels, making it much harder for companies to borrow.

Investment bank CSFB is looking at slashing costs worldwide. Adebayo Ogunlesi, the new head of investment banking, warned staff last week that cuts would be 'swift and severe'. Group chief executive John Mack, known as 'Mack the Knife,' laid off 760 staff - or 20% - around the world last autumn.

Rumours are swirling that rival firm Goldman Sachs will begin cutting a further 2,000 staff as early as this week, with more lay-offs coming in the spring if business does not pick up. The equity divisions are likely to face the brunt of cuts.

Some suggest the only thing which may save equity divisions will be handling the huge rights issues expected from companies weighed down by huge debts.