PHILIP JOSLIN, a senior clinician at Lifeworks, a private clinic in London dealing with addictions and depression, believes redundancy "is not just a matter of economic survival. It threatens people's very identity."

As the economy slows and jobs are cut, psychiatric practices in London's financial centre are reporting a rise in referrals. Mark Beadle, chief executive of Capio Nightingale Hospitals, a provider of private psychiatric treatment, says the number of City workers coming to his clinics with depression or anxiety has risen by 30 to 40 per cent.

The psychological impact of redundancy goes beyond those whose jobs are cut, however. Christine Martin, therapist and partner at Haswell, Martin Rose, a private practice in central London, says: "Redundancy raises a wide range of issues - for the person losing their job, for the 'survivor' who hasn't been made redundant and the people managing the process, like human resource professionals."

Bankers are under the greatest stress, since financial services are at the sharp end of the downturn. JPMorgan Chase, the investment bank, has predicted that the fallout from the credit crisis could involve the loss of up to 40,000 jobs in London's financial services sector during 2008 and 2009.

Don Serratt, director of Lifeworks, says the culture of financial services can make workers more vulnerable to anxiety in a downturn. Serratt, who was a banker at Bear Stearns, says the City attracts high-achieving, hard-working alpha males.

"Some think the world revolves around them. When things are good they feel like masters of the universe, but when the bubble bursts, they take it hard. It can be devastating."

He has seen the number of admissions to his programme for "impaired professionals" rise by 20 per cent in the first six months of the year, compared with a year ago. The majority on this course are City workers with high levels of responsibility. But as jobs are shed outside financial services, redundancy will raise issues for people across the economy, not only in the City. It often makes people question their sense of self. According to Martin: "Redundancy demands existential questions, alongside the financial worries. In other words, 'Who am I if I'm not working?' "

Upheavals in the workplace can undermine employees' sense of security, particularly if redundancy is not a one-off. Martin says: "Even those who survive the first wave are left with uncertainty over whether their job is safe. They worry, 'Is that it?'"

David Freud, author of Freud in the City, former vice-chairman of investment banking at UBS, says any changes in power networks at workplaces can be unsettling.

"The people who are in control in boom times are not the ones that are in control in recessions. Suddenly, different people are in control and all of your networks are uncertain.

"You have to justify your decisions to a different group of people. It's a massive transformation and you feel out of control. The master of the universe in an upswing is now desperately neurotic because all their power bases have gone."

It may also mean employees have to take on an increased workload. William Shanahan, medical director and lead addictions psychiatrist at Capio Nightingale Hospitals, does not believe we are in the grip of a "credit crunch depression pandemic", but says many of his clients are working harder. Some are "burnt out", which can produce psychosomatic reactions like "rashes or short-term paralysis".

For some, he says, one way of relaxing might be to resort to drink or drugs, particularly cocaine, which in turn will put pressure on their home lives and health.

Some who keep their jobs, according to Martin, "experience 'survivor guilt'?". She says it can have an impact in "making people question their self-worth, asking why they were allowed to stay when others were not".

It can also lead to feelings of exclusion. "There is a kind of wall that develops in large organisations between those that are staying and those that are going," she says. "Survivors are excluded from the consultation process, but there is a barrier between those who stay behind and friends who might be losing their jobs."