The severe credit crunch that several of the world’s economies are facing has already led to some hard decisions. Already hundreds of thousands of people have lost jobs as companies try to make up for lost profitability by cutting costs and downsizing operations. Britain has not been untouched by this alarming situation, and as many as 11,000 jobs are threatened in its financial services sector according to CBI. A quarterly study of financial industry by PricewaterhouseCoopers points out to a fall in employment and profitability rates to their lowest levels in more than five years. The survey also points out a steady decline in any optimism of a recovery. Of 79 firms surveyed, 97 per cent said that credit conditions were likely to worsen over next six months. Nearly 90 per cent said that the trend would continue longer than that. This is a sharp contrast to December’s findings wherein 70 per cent firms were optimistic of the situation easing in six months. The number of firms who are likely to go for reduction of staff outnumbered the firms who are likely to hire by 33 percentage points. Business volumes are also reported to be decreasing alarmingly. The situation in the markets is very pessimistic and investors’ confidence has taken a beating. This could further dampen any chances of an early recovery. The CBI has put faith in liquidity injections and interest rate cuts to improve the position, but these are likely to be only short term measures with little, if any, effect at all. Restoring the fundamentals would take longer than that. Ian McCafferty, the CBI’s chief economic adviser said: Credit markets are unlikely to return to anything like normality for some time to come. Even when they do, we will not see a return to the very favorable lending conditions that existed before August. Clearly the crunch is likely to get worse as more firms from around the world come in with bad results. This could lead to a sort of spiral as the poor health of financial markets gets passed on to next financial years as well.