Jobless City workers face tough times

By Simon Jack Business correspondent, BBC News

UBS cutting 5,500 jobs after losing $11bn (�5.5bn) is the latest bit of bad news from the City, where axing thousands of jobs and losing billions seem to have become the order of the day.

By the end of next year, some 20,000 jobs will have been lost in London's financial district, according to the Centre for Economic and Business Research.

Those made redundant will face a tough job market.

Jobs in the financial sector are among the most sought after in the world.

Almost a decade of big profits have meant big bonuses to spend on houses, holidays and fast cars.

For the 2006 financial year, City workers shared out almost �9bn in bonuses, and 2007 was not far behind at more than �7bn.

But the 2008 bonus pot is unlikely to be overflowing.

The recent crisis in financial markets has cost more than $300bn so far, and the final bill could rise to close to one trillion dollars, according to the International Monetary Fund.

UBS alone has written off $37bn because of investments linked to the US -mortgage market.

The higher they climb...

Philip Augur, the former head of Schroders in the UK and the author of "the Greed Merchants" has hired and fired dozens of highly paid staff.

Mervyn King is critical of the way City firms reward their staff

The flip side for highly paid workers is that cutting jobs is the quickest way for their employers to save money in a downturn, he explains.

Workers in finance have traditionally defended their high pay by pointing to their lack of job security, though Mr Augur is not sure if that defence is solid.

"Although I buy that to a certain extent, other industries are competitive and demanding and I think the industry may be guilty of crying wolf," he says.

Yet there is little doubt that the financial services industry can be particularly brutal, failing to help staff who are not performing well.

"If you make a mistake, you will get a sharp look and a raised eyebrow across the desk," he says.

"It will be communicated to you that if you make another one, you had better watch out"

Powerful critic

It is that environment that creates the stress that so many city workers complain of.

The pressure to perform creates a need to be seen to put in long hours, which affects workers and their families, explains Emma Donaldson-Fielder, a chartered occupational psychologist.

"The pressure to perform can lead to people drinking too much, or seeing very little of their families," she says.

But this is not new. High rewards have always demanded long hours and punishing deadlines.

Only now, the UK's top banker, Bank of England Governor Mervyn King has joined the critics.

Last week, Mr King told the Treasury Select Committee there were problems with the way financial institutions reward their staff and insisted that the promise of huge bonuses distorts how bankers go about their business; they take risks at shareholders expense in return for short term personal gain.

Mr King was also worried that too many of the UK's most talented young are enticed into the City because they are paid so much more than those working elsewhere.

But will the life of the city banker change because of a trillion dollar global loss?

UBS now accepts that the way it paid traders led them to do deals they would otherwise not have done and are looking at restructuring compensation to more closely align staff and shareholder interests.

But with the bonus culture so deeply ingrained in the City, it will be a surprise if the merry-go-round of hiring, firing and big bonuses changes radically anytime soon.

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