City bonuses set to slump – with taxman hit too

CITY bonuses are expected to collapse this year and next, to levels not seen since 1998 as wholesale banking performance stalls, a think tank has warned.

Total bonus payouts in the City for 2012-13 are expected to fall by 48 per cent to £2.3 billion, down from £4.4bn for 2011-12 and drastically down from its peak of £11.6bn in 2007-8, according to the Centre for Economics and Business Research (CEBR).

Douglas McWilliams, chief executive of CEBR, said that remuneration levels were “coming back into the real world”, although he warned that the biggest loser was set to the tax man, which is reliant on highly taxed bonuses to fund services.

CEBR also said that the number of well-remunerated City jobs has fallen by close to 100,000 since 2007.

A further sharp fall is predicted for 2012-13 bonuses, which will be paid out based on performance during 2012.

The collapse in City activity and the slack labour market mean that large bonuses are now “the exception, not the rule”, CEBR said.

McWilliams said: “City remuneration levels are coming back into the real world. Employees are being told ‘Your job is your bonus so don’t expect a large sum in addition’.

“But before anti-City campaigners start jumping for joy, they should reflect on the fact that, because City earnings are very highly taxed, the biggest loser of all will be the Treasury, meaning fewer funds available to finance public services.”