Bonuses set to plunge 70%
City bonuses set to fall dramatically
Thursday, 09, Oct 2008 11:01
The bonus culture is over and City workers can expect next year's payment to be down 70 per cent from their peak, according to analysts.
According to research into the London and City economy by the centre for economics and business research (cebr), the bonus payout for 2008 by the City - to be paid at the start of 2009 - is forecast to be slashed by 60 per cent compared with the peak payments for 2006, dropping to £3.6 billion.
A further drop in city bonuses for 2009, to £2.8 billion, down 70 per cent from the peak, is also predicted.
Richard Snook, cebr's senior economist and co-author of the research, said: "This is not the end of the bonus system.
"But with shareholders (likely to include the government in some cases) and the FSA breathing down employers' necks and a labour market with plenty of people available, it is unlikely that we will see bonuses paid on the scale of the past four years in the foreseeable future."
However, the researchers said it is not clear whether City firms will wish to, or be legally allowed to, pay out bonuses this year.
Although the news may not elicit much sympathy from those not on a City payroll, cebr said the scale of the reductions could have a knock on effect on the economy.
Research undertaken by the group suggests that 50 per cent of bonuses tend to be invested in property, therefore adding to the current weakness in the housing market.
In addition, sales of luxury goods will be disproportionately affected - the latest data on car registrations shows that new registrations of Porsches are down 27 per cent and Aston Martins down by 25 per cent on last year.
In contrast, Kia registrations have bucked the trend with an 18 per cent year-to-date surge and Volvo registrations are up 13 per cent.
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