The office Christmas party is cancelled

Two years ago they would have been dancing until dawn, having sunk a three-course dinner and magnums of vintage champagne. Now workers in Britain's formerly booming banks are having to dip into their own pockets to fund their Christmas parties.

Across Britain, firms are cancelling or scaling back the end-of-year festivities, but the cutbacks are greatest at financial institutions. High Street and investment banks contacted by The Independent said they would either hold no or modest celebrations as a result of harsher trading and the risk of a public backlash.

Northern Rock, the publicly owned bank, has cancelled its Christmas party, while Lloyds, which was also rescued by the taxpayer and has recently cut 5,000 jobs, claimed it would be taking a "prudent approach".

The Royal Bank of Scotland, another public bailout, is spending only £10 a head, having slashed its entertainment budget by 90 per cent. "All our events are modest and appropriate. We are mindful of the way we do our business, and that includes cutting back our hospitality," a spokesman said.

The US investment bank Morgan Stanley is not holding a party. The consultancy firm KPMG, which previously laid on lavish black-tie dinners with free alcohol, has trimmed its budget. Spokesman Mark Hamilton said: "Rather than a dinner in a hotel, it will be smaller teams going out for lunch."

Even Goldman Sachs is not funding any Christmas parties this year, despite making plenty of money, although its employees – who earn an average of £313,000 – are still likely to be popping champagne corks.

"Last year and this year things have been more modest," said a source at the investment bank. "Now it's at each member's personal expense. I think in the current circumstances it would be inappropriate [to hold lavish parties]. We are taking flak."

The lack of the festivities is not confined to the finance industry. In its annual Christmas party survey, to be released next month, the Chartered Management Institute found that only 42 per cent of firms said they were funding parties this year, compared with 72 per cent in 2006. Honda, which in the golden days paid £100,000 for a three-course meal and drinks in a marquee, is not holding a party after 1,300 people took voluntary redundancy at its Swindon plant.

"They used to have a lovely time," reminisced spokesman Paul Ormond. "It's a great opportunity to let off steam and mix with colleagues. But ... we are in difficult times." Other companies, such as the house-builder Bovis Homes, are planning more modest events.

PricewaterhouseCoopers' hospitality director, Stephen Broome, said this year's cutbacks were more extensive because of the length of the recession. He explained: "This time last year many corporate Christmas lunches had already been booked, deposits taken, and to cancel would have meant letting staff down. However, faced with the economic realities, bosses have now had nine months to prepare staff for more restrained celebrations."