The City could be facing up to 10,000 job cuts, an economic think tank has warned – an estimated 54 per cent higher than the same group predicted just three months ago.

The Centre for Economic Business Research (CEBR), which publishes economic forecasts twice a year, predicted three months ago there would be around 6,500 job losses. It now fears this could increase to between 8,000 and 10,000 when it publishes new data next month.

CEBR chief executive Doug McWilliams stressed the figure is an estimate, and could change again.

The economic research group bases its predictions by monitoring levels of activity in the City - volumes of transactions on the stock exchange, numbers of mergers and acquisitions and private equity deals - and then estimates how many jobs would be needed to keep those levels going.

Several thousand jobs have already been cut at banks including Citigroup, Morgan Stanley, Goldman Sachs, Deutsche Bank and Merrill Lynch.

Over the weekend it was revealed up to a possible 2,500 Northern Rock employees out of a total workforce of 6,000 could lose their jobs.

Mr McWilliams said: "Obviously the world moves on. Previously we thought it would be a slightly more limited number of jobs that would be lost but confidence is rather weaker than we assumed. On what we can see now, the number of job losses will be higher. It is all to do with confidence, and confidence is one of these things which is tremendously fragile and volatile. The number could yet change."

However, Mr McWilliams said he did not expect job losses to be as severe as the dotcom crash in 2001 when 20,000 jobs were cut.

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