Banking

MORE jobs in the UK's banking sector will disappear as the economy pays the price for years of unsustainable growth, the chief economist of the country's biggest bank has warned.
Dennis Turner, of HSBC, said that banks could face a recruitment freeze for between five and seven years.

His gloomy forecast came just hours after the bank announced it would axe about 500 UK jobs in its investment banking division as part of a ADVERTISEMENTworldwide cull of 1,100.

Visiting Leeds and speaking exclusively to the Yorkshire Post Mr Turner said a combination of the credit crunch and the economic cycle had created a time of uncharted difficulty and that unemployment could rise to 1.1m or 1.2m over the next year.

"Policymakers are grappling because there are no precedents. It is a problem about confidence (in the baking sector] and about liquidity.

"We will see fewer people working in banking over the next five years. We could see a recruitment freeze for five or seven years. It is a hell of a long time."

Mr Turner said that banking currently made up 20 per cent of the UK's gross domestic product but this would shrink.

"There has got to be some slowing down in the sector. People who pick up six-figure bonuses will find their jobs vulnerable – but they tend to be in London."

But he pointed out that there was a high level of natural wastage in banking already – making redundancies less likely – and that jobs in branches seemed secure as banks tried to increase their retail work. The industry would pick up as the property market recovered but he did not know if HSBC would cut further jobs, he added.

The credit crisis could also lead to more banks being taken over, he said. Lloyds TSB bought Halifax Bank of Scotland for £12.2bn last week and commentators have predicted that loss-making Bradford & Bingley could also be swallowed. B&B said on Thursday that it was cutting 300 jobs in Hertforshire to save money and taking on 70 staff at its Bingley head office to help collect bad debts. The second stage of B&B's review will involve the 1,400 staff employed in Bingley and others in Crossflatts.

Mr Turner firmly refused to comment on speculation that HSBC could buy B&B but said: "Some buy-to-let lenders are more at risk of being taken over."

He also said the UK's boom years had been supported by an outpouring of expenditure funded by personal debt – but said this was only part of the reason for wider economic problems now.

"Unemployment was falling and spending rising but on the back of borrowing and that was not sustainable. There is £1.4 trillion of household debt. Everybody on average owes 19 or 20 months' pay.