A merger of HBOS and Lloyds TSB could lead to as many as 40,000 UK job losses and 1,000 branch closures, rival bankers estimated, because of the huge overlap between the two banks.

Unite, the trade union, rushed out a plea for no compulsory redundancies today in the face of what could be the biggest private sector cull in living memory.

HBOS employs 72,000 people while Lloyds has 70,000, in both cases almost entirely in the UK. In mergers of such similarly positioned organisations, as many as one third of the combined workforce can lose their jobs.

The potential job cuts emerged as new figures showed that UK unemployment has risen to a nine-year high of 1.72 million after increasing by 81,000 in August. At the same time, the number of people claiming jobless benefits rose by 32,500 - the highest rate since 1992.

When Royal Bank of Scotland took over National Westminster Bank in 2001, 6,800 jobs were eventually lost. But there was much less overlap in that case because RBS was predominantly in Scotland and NatWest in England and Wales.

One banker said: "There's massive overlap between Lloyds and HBOS. It's going to be unbelievably messy."

However, there is no certainty a deal would be done and it is not clear the extent of intervention by Government, which might insist on a soft approach to cost-cutting as the price of helping get the deal done.

Job losses could be severe in branches, call centres, processing centres and the head offices of the two banks. Lloyds operates one of the biggest networks in the country with 1,900 branches under the Lloyds and Cheltenham and Gloucester brands. HBOS has 1,100 branches, in many cases on the same high street.

"Staff working in financial services must not pay the price for corporate greed," said Graham Goddard, Unite deputy general secretary.

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