According to the authors, most cuts will be in those innovative sectors of the City which have grown rapidly over the past four years. Private equity, mergers and acquisitions, hedge funds and structured finance bosses will have to write the most letters. Indeed the investment banking sector will see the most cuts at 2300, followed by fund management at 1600.

The more traditional sectors of the City, such as securities will see fewer job cuts at 1200, on fewer initial public offerings. However this sector will likely come under additional pressure in 2009 when emerging market growth slows down.

The derivatives and foreign exchange sector is also forecast to have a lower headcount through 2008 as 700 jobs go, driven by credit derivatives. Finally, the insurance sector should see 600 fewer jobs and professional services in the City only 300 - such firms are likely to lower the number of employees obtaining qualifications in the year rather than lay off staff.

The authors point out that the job cuts will occur from a much higher base for 2007 than was forecast six months ago. Indeed, the job increase for 2007 was revised up from 4000 in April to 11,000 because of the extraordinary growth of the City up to the summer. This took jobs to a record high of 349,100 this year.

The report also suggests that the job losses will be short lived with most sectors seeing job increases in 2009 as the US economy and the financial markets recover. However jobs will fail to return to record setting levels until 2010 when the likes of China will return to the positive side of their economic cycle, following a break in 2009. This will fuel liquidity in London's financial districts.

Sarah Bloomfield, economist at cebr and one of the report's authors, comments: "What we are likely to see as we enter 2008 is a reduction of almost one for every two jobs added this year. But although this equates to a reduction in total jobs of only two per cent, it will feel worse than it actually is because the City has become used to adding jobs at breakneck speed."

The impact of the sub-prime crisis and liquidity dry-out will also hit City workers in the backpocket, says CEBR, which forecasts that this year's bonus payout will be cut by 16% to £7.4 billion relative to the record payout of £8.8 billion in 2006.