Thousands more jobs in the Capital set to be lost by 2011

ONE in every 22 workers in Edinburgh and the surrounding areas will lose their jobs over this year and next, it has been warned.

A new report commissioned by Scottish Enterprise forecasts that employment levels in the East region will fall by 3 per cent this year – which would be equivalent to 7,638 jobs in the Capital.

In a clear sign that there is some way to go before the economy picks up, it warns that employment numbers will decline by another 1.6 per cent in 2010 and not start to recover until 2011.

The decline in employment levels is also expected to last longer in Edinburgh than the rest of Scotland. The troubles within the financial services sector are blamed for the gloomy picture. Business services, which are reliant on financial firms as clients, are also expected to suffer.

The report comes as around 150 jobs in Edinburgh look set to face the axe following the latest cuts revealed by the Lloyds Banking Group.

Unemployment in Edinburgh has already nearly doubled in the last year and today's forecast indicates it could get a lot worse.

The report, compiled for Scottish Enterprise by Oxford Economics, said: "The (job losses] will not be confined to the financial services sector but spread across all sectors, with only the public sector escaping from job losses.

"The recovery process is likely to be slow, with the region expected to underperform until 2011. The fall in labour market participation levels in Edinburgh is expected to be more protracted than across Scotland and the UK, with only a muted recovery."

The report also warns that more than 65,000 jobs are expected to be lost in UK financial services this year, with about 6,000 in Scotland. It warns "the brunt" of the Scottish losses will be in Edinburgh.

Across East Scotland, employment is expected to decline by 20,600 in 2009 and 10,600 in 2010, with a return to jobs growth not expected until 2012. Latest data shows that 3 per cent of people in Edinburgh are currently claiming Jobseekers Allowance, nearly double the rate this time last year. Last month, there were 2,502 job vacancies in Edinburgh, down by nearly a third on May 2008.

Scottish Enterprise said:

"The findings will play an important role in helping to inform our priorities for future investment and allow us to achieve the greatest value and economic impact."

Councillor Tom Buchanan, the city's economic development leader, said: "In the context of a global recession, these forecasts are disappointing but not wholly unexpected. That said, unemployment in Edinburgh is still below the Scottish and UK average – and we expect it to remain that way."