Turmoil caused by Switzerland’s shock move to abandon the franc’s peg to the euro struck at the heart of the City today as foreign exchange broker Alpari UK went bust.

The firm, which employs hundreds of staff around the world and sponsors West Ham United FC, said it was forced into insolvency after it became liable for trading losses its clients could not cover.

A source close to the events predicted that the fall-out from yesterday’s turbulence would see more companies hit and a major shrinking in the number of London’s foreign exchange players.

“If we can go within 24 hours, I think that says everything about the rest of the market,” he said.

“There are a whole host of others who over the next few weeks and days will announce the same thing or will be under big takeover discussions.”

Alpari said its client funds were segregated in accordance with Financial Conduct Authority (FCA) rules - which are designed to speed up the return of assets in the event of a financial firm going bust.

The FCA said: “We are aware of the situation and working closely with the firm.”

It was understood that the fall-out from the turbulence last night had resulted in Alpari going into urgent talks with its bankers late into the evening but that as midnight approached it became apparent it could not be saved.

The problem that sunk Alpari was understood to be that client funds were exceeded multiple times by the losses they sustained.

An individual trader with a £5,000 account would have taken losses of £100,000 which were very unlikely to be recovered. Some of Alpari’s clients had accounts of £2-£3 million.

The firm was hit by a shock because trading in the safe-haven Swiss franc had become an option that “almost had no downside” as there was a cap in place and no hint that it would be ditched.

Markets have become used to policy makers in the US, UK and Europe drip feeding suggestions about policy to prepare markets for major announcement but there was no clue before yesterday’s bombshell from Switzerland’s national bank.

This “irresponsible governance” threatened to dramatically reduce the scale of the forex industry in the UK, it was claimed.

Alpari’s announcement today prompted rivals to issue a slew of updates to reassure the City about their own financial positions.

IG, another currency firm, had already said yesterday that it would have to shoulder up to £30 million of losses - but that it had an “extremely robust financial position”.

Switzerland’s decision to abandon the cap on the franc, which had limited its value to 1.20 euros, caused what was described as a “tsunami” in currency markets.

Alpari analyst Craig Erlam described the shock move as “irresponsible and abrupt” and “idiotic” in a regular note issued early today before the insolvency was announced, warning that the damage could have “longer term impact”.

The euro had initially plunged by 30% against the franc while the pound tumbled by 26%, though both later pared back some of their losses. Stock markets fell sharply then rose again as investors digested the announcement.

Markets were calmer today as the pound, the euro and the US dollar recovered some of their losses against the franc.

Alpari’s collapse leaves Premier League West Ham without a shirt sponsor in the middle of a three-year deal that started at the beginning of the 2013/14 season and was reportedly worth £3 million a year. The club was yet to issue a statement.

It comes after the east London team was faced with a similar situation in September 2008 when its then sponsor, travel firm XL, went into administration.

At the time of Alpari’s deal with West Ham in 2013 it was reported to have 207,000 clients worldwide and average daily trading volumes of £6 billion. In 2011 it had more than 600 employees.

Today the firm said the Swiss move had created an environment of “exceptional volatility and extreme lack of liquidity”.

“This has resulted in the majority of clients sustaining losses which has exceeded their account equity. Where a client cannot cover the loss, it is passed on to us. This has forced Alpari (UK) Limited to confirm today that it has entered into insolvency.”

Another firm, London Capital Group, said it would see a hit of up to £1.7 million. City Index said it had not suffered any material impact after the “extreme volatility”.

Peter Cruddas, chief executive of CMC Markets, said it sustained some losses but that the overall impact had not materially impacted the group, that its balance sheet remained strong, and it was “business as usual”.

Philippe Ghanem, executive director of Abu Dhabi based ADS Securities, said state-of-the-art currency trading meant the impact of a move on the scale of yesterday’s meant that “shockwaves are instantaneous and global”.

He said ADS was able to turn a potential disaster into a successful trading day.

“In the next few days, weeks and months we will see regulators, central banks and financial companies looking at the way things unfolded and how the risk was managed and handled,” he said.

“Unfortunately as they sit down to discuss what happened a number of brokerages will have already closed and many thousands of clients will have lost significant amounts of money.”