Top City firms are preparing for a possible second wave of job cuts by making sure they have secured adequate lines of credit from banks to cover further redundancy payouts, according to one of the sector’s major lenders.

Meanwhile, mid-tier law firms are being squeezed by banks demanding that they take on additional banking services before loans are granted.

Mark Dean, director in the law firm group at Citi Private Bank, which lends to firms at the ‘top end’ of the market, told the Gazette that top firms had wanted recent restructurings to be one-off exercises, ‘but if it turns out to be a double-dip recession, we’ve been told that they will do it again’.

He said that firms are ‘sticking very close to their bankers’ and securing assured pipelines of cash should they have to pay off redundant partners once again.

Dean also said that, in common with other banks, Citi is asking mid-tier firms more questions and requesting that they take additional banking services before loans are granted.

He added: ‘If you’re a magic circle firm you have enough business to share among three or four banks. If you’re a mid-tier firm, it’s a lot harder. To justify the use of credit, we are having grown-up discussions with firms. We ask them to use us for cash balances and client money, and we ask for access to partners so that we can offer private banking services. All banks are doing this.’

Dean said that bankers are under pressure to bring in new business from firms. ‘After six months, if there is no new business with the firm, you have to go back to them and have another discussion,’ he said. ‘All of the firms understand this and are receptive to the conversation.’

Cost-cutting at major firms is also ongoing, he said, with advertising, travel and corporate hospitality budgets severely cut. ‘In this environment most firms are still actively reviewing expense budgets [and] continuing with large-scale cost-cutting to this day. They’re really going down to the bone.’