The gloom in the City of London job market since the dotcom crash in 2000 has begun to lift, according to a think-tank that forecasts a rise in employment in the Square Mile.

In a dramatic reversal of its May prediction of 10,000 job losses last year, the Centre for Economics and Business Research said employment turned a corner and by 2006 would be back at levels seen before the financial downturn.

Employment in financial services rose 1.5 per cent in 2003, after a 4.8 per cent drop in 2002 in the aftermath of the terrorist attacks on the US, the centre said.

With growth of 1-2 per cent forecast for this and the next two years, employment will surpass the 2001 high of 325,000 jobs in the second quarter of 2006.

Employment reached its lowest in the second quarter of 2002 when the number of City workers dipped below 300,000. - (Financial Times Service)