Turmoil in the banking sector has caused City recruitment levels to fall by 20% amid "unprecedented" market conditions, recruitment firm Hays said yesterday.

Thousands of job cuts have been made across the UK's banking sector in the fall-out from the credit crunch, with many embattled banks also putting a freeze on recruitment as the crisis takes its toll.

Hays yesterday signalled the extent of the trouble in the sector as it said its City recruitment levels in the UK plunged by 20% in the three months to the end of September, which followed a 20% fall the previous quarter.

The group said the housing market downturn was also hitting recruitment in the UK property and construction sector.

Housebuilders have been laying off thousands of staff as they put construction projects on hold amid record price falls and as fewer buyers are able to secure mortgages in the credit squeeze.

Net fees fell by 8% in Hays' UK and Ireland division.

Strong demand in the education, healthcare and retail and purchasing markets helped offset the recruitment slump elsewhere. It has also been shifting focus onto the public sector, which is less affected by the current woes, with 15% growth in net recruitment fees over the quarter.

Hays said it was keeping a tight control on costs to help it through the tougher recruitment market, itself cutting jobs to save money.

The group reduced its UK and Ireland workforce by 5% in the first quarter, which followed a 7% cut - or 400 staff - in the previous six months.

Alistair Cox, chief executive of Hays, said: "In the last two quarters we have continued to take action to reduce our cost base in those markets already affected by the wider economic issues."