Credit Suisse First Boston (CSFB) cut IT contractor rates globally by 10% last week, in a move other companies could soon follow. Hewlett-Packard is among the other companies purported to be cutting contractor rates.

The cut will affect IT recruiters that have already been battered by the economic slowdown. ‘This is very worrying news. My concern is that other companies may now follow suit,’ said chief executive of the Association of Technology Staffing Companies, Ann Swain.

A source close to CSFB claimed the decision to cut rates was ‘unsurprising’ given the economic environment. ‘Like other investment banks we are trying to cut costs where we can,’ she said. Many other banks have simply made contractors redundant, she claimed.

The impact for recruitment agencies will be ‘severe’, said Swain. ‘The market’s so tough at the moment. A desperate agency might even bear that 10% themselves.’ CSFB denied allegations that it has suggested its contractors swap agencies to ones which might be prepared to do this.

But the MD of a large IT company said that companies in the City may be responding to adjustments in starting salaries over the last six months: ‘Contractors may now be starting on a considerably lower rate than those with the same skills sets six months ago. Companies will therefore have great discrepancies in the hourly rates of contractors,’ he said.

The PCG criticised the cuts as ‘short-termism’ on the part of City institutions.