The jobs market for IT contractors has taken a major hit after a leading high street bank announced huge jobs cuts.

It has been announced that the Royal Bank of Scotland plans to cut 3,500 jobs within its technology services and business operations.

It is thought that 1,000 IT jobs will be gone by 2012, with those affected being both permanent staff and IT contractors, for whom competition for existing vacancies will become tougher.

In addition, 500 IT jobs at the bank are set to be moved offshore - effectively taking the jobs away from UK-based workers.

A spokesperson for RBS said that although there is no freeze on hiring, the group will be reducing the number of temporary staff it takes on in order to protect its permanent workers.

Jonathan Loynes of Capital Economics recently suggested that the public sector spending cuts will result in a rise in unemployment, as the private sector is not yet able to absorb the losses.