City Bonuses To Take Another Leg Down For 2012

Bad Bonus Pool

We knew it was going to be bad, but not this bad!

New estimates and forecasts from the Centre for Economics and Business Research (Cebr) show a further downward revision in the forecast for City bonuses.

The level of bonus forecast to be paid around Christmas and in the early months of 2013 is now down to £1.6bn – down from a peak of £11.6bn in 2008 and revised down from a forecast £2.3bn made by Cebr 6 months ago. The total bonus pot will be lower than any year since 2003.

Year bonus paid - Bonus pool (£m)

2003 - £3,329
2004 - £6,400
2005 - £6,950
2006 - £9,653
2007 - £11,383
2008 - £11,565
2009 - £5,332
2010 - £7,336
2011 - £6,749
2012 - £4,402
2013 - £1,585
2014 - £1,268
2015 - £1,256
2016 - £1,270
2017 - £1,303

The lower levels of bonuses reflect two factors. First there has been a collapse in City activity during the summer od 2012. Equity trading is down 20% in value year on year; international orders for equity trading down over 50% which reverses last year’s boom; gilts trading is down by a third, partly reflecting the increasing proportion locked up by the Bank of England; currency trading is down 5% this year – the first fall since 2009; UK M&A activity has fallen by about a third during this year and international M&A has fallen even more. Even the formerly dominant derivatives sector is also down by around a fifth so far this year.

The only high points are that private equity and technology M&A seems to be holding steady. In addition, as bonuses become publicly contentious, City firms are increasingly substituting salary for bonus.

Cebr Chief Executive Douglas McWilliams said: ‘The biggest loser from this is the taxman, who typically earns more from City bonuses than the employees. Taking into account the loss of income from a much smaller City, from lower corporation tax, stamp duty and other city based taxes, I estimate that government revenues from the City in the current financial year are likely to be about £40bn compared with the £70bn which it received in 2007/08 at the peak of the cycle. I did point out at the time that the high receipts were unsustainable and that a substantial proportion should be banked rather than spent but unfortunately Gordon Brown did not listen and more than spent his entire revenue – and the rest is history. ’

Source - Cebr

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