The government has reduced interest rates in response to the credit crunch, much to the relief of City recruiters who are experiencing a drop in business. The 0.25% reduction reduces the interest rate from 5.5% to 5.25%.

"Thousands of financiers in the City still fear for their jobs as the credit storm worsens, but a quarter point cut will boost confidence a lot.  Thanks to the MPC’s commitment to cutting rates, we’re confident that fewer jobs are at risk," said John Lacey, managing director of Longbridge Search & Selection.

He continued: "We’re seeing a lot of churn, but people are still getting jobs in banking middle and back office.  Britain can weather this storm, but to boost growth we’ll need to see more action from King and co.”

The rate cut comes after hiring in the City’s financial services sector dropped 2% in March, leaving job opportunities down 23% on last year's figures according to analysis from Morgan McKinley’s London Employment Monitor.

The decision to lower rates was made in response to worries about the effect of the credit crunch on the UK's mortgage market and marks the third consecutive interest rate reduction in the last five months.