More than 110,000 people working in the banking and financial services sector will lose their jobs next year, according to economists.

The gloomy predictions came in a report by management consultancy Hay Group and the Centre for Economic and Business Research, which predicts unemployment will rise by 350,000 in 2009 and British finance companies were planning on cutting their staff by 1.9%.

The dire forecast was made as hundreds of investment bank staff at collapsed Lehman Brothers searched to find new jobs yesterday and billions of pounds were wiped off international stock markets.

Hay Group's associate director Russell Hobby told the Daily Telegraph: “Redundancies would be the most common form of job losses, but mergers and bankruptcy could also play a significant role.”
Despite profit warnings the report added that nearly 70% of banking bosses still intend to give themselves bigger bonuses and researchers also found that many large companies would rather make job cuts than reduce bonus payments or tackle expected wage rises of 5.2%.