There was further evidence that the credit crunch was hitting the City yesterday as jobs figures from the Office of National Statistics reported the first fall in financial sector employment in six years.

The ONS reported a drop of 5,000 jobs in the financial and business services sector in the final quarter of 2007.

The fall was the first official drop in figures since the second quarter of 2002, signalling the end to a period of prosperous growth which has recorded one million new jobs being created. Analysts are predicting further falls as the affects of the emerging economic problems in the US unfold on the global economy.

However, despite the latest drop, the sector added 150,000 jobs during 2007.

There was also a rise in the number of public sector workers which increased by 7,000 to 5.78m in the final three months of last year.

And according to the ONS figures, UK unemployment fell by 32,000 to 1.61m during the same period and job figures were increased by 166,000. The ONS also said the number of people claiming jobseeker's allowance in February also fell by 2,800.

Average earnings rose at an annual rate of 3.7% in January, down slightly.