London's financial centre is predicted to cut bonuses and jobs this winter as a result of the credit crunch.

The Centre for Economics and Business Research (CEBR) forecasts bonuses in the City will plunge 16 percent from last year's record of £8.8 billion to £7.4 billion. Jobs are also set to get the axe over the next two years with CEBR claiming 6,500 are up for the chop in the near future.

The predicted drops have been fuelled by the debt markets with top investment banks falling into losses.

CEBR economist Sarah Bloomfield told The Evening Standard: "The outlook for the City suggests that its 350,000 employees will need to get used to a smaller payout over the next two years. However, by any measure, at £7.4 billion in 2007 and £6.2 billion in 2008, it will still be a very large bonus cheque."

Jonathan Said, senior economist at CEBR, added: "We expect that the bonus cuts this year and next will take the edge off the London property market and high-end retailers' sales growth. Yet in no way will it mean a drying up of these markets."

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