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With redundancies across the financial sector expected to rise significantly this year, employment consultancy firm Penna Career Transition is urging an honesty is the best policy approach to letting go of employees.

Job losses for the City could amount to 10,000 for the year, according to research by International Financial Services London, while labour market research by the Chartered Institute of Personnel and Development has suggested that two in five employers plan to make redundancies this year, a 17 per cent rise on three months ago.

Mr Owen Morgan, head of commercial operations for Penna Career Transition, said: "Whenever there is a period of change, everyone gets unsettled and talented people tend to jump ship rather than possibly be pushed, leaving perhaps not the best individuals. Reassure remaining staff about where the company is going. Be open and honest; people value honesty even if it is bad news. This could be informal, a half hour chat before work or during lunch.

"A lot of organisations go through change and then look strategically to take the business forward. They get so fixated on trying to do a good job affecting change, that they lose sight of the longer-term goal. They do not tend to think about the type of person they retain."

Mr Morgan also emphasised the importance of not making assumptions, and to look for voluntary redundancies in the first instance. Mr Morgan explained: "There has been a rise in the financial services arena following the credit crunch fallout. That has been the primary driver. But the first thing employers should do is understand what they want to achieve by the end of this change. Most companies are making redundancies now because they need to make cost savings but that is not always the reason, it could be relocation, for example.

"In understanding the timeframe, do not rush through this process because it could have a negative impact on the way external people view the company as well as the remaining employees", he added.

The CIPD report also found that workers in the East Midlands, the West Midlands and the south west are most likely to be dismissed, with employees in Scotland, Wales and Northern Ireland set to be safest in their jobs.

John Philpott, chief economist for the CIPD, concluded that the employment market faces a tough future.

He said: "Employers’ initial reaction to talk of an economic slowdown was to hold fire and take stock of the situation, but a substantial number now expect to trim their workforce.

"With net recruitment activity still positive, signs of mounting employer pessimism should not be read as evidence of a jobs meltdown. But it does suggest the UK is entering a period of slower employment growth and somewhat greater job insecurity than in recent years."