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Despite fall in bonuses in 2010/11, growth in City workers’ pay packets continues to outpace the rest of the UK

Falling bonuses offset by rise in regular pay

Bonus payouts in the City for 2010/11 fell by 8% to £6.7 billion, down from £7.3 billion in the previous fiscal year.

These are the key findings of updated research into the London and City economy by the Centre for Economics and Business Research (Cebr) — one of the country’s leading economics consultancies and renowned commentators on the London economy.

Despite falling bonus payments, City workers continue to earn bumper pay packets bolstered by rising regular pay. Cebr estimate that average regular pay for City workers in the first quarter of 2011 is some 7% higher than a year ago and much higher than growth of just over 2% for the as a whole – lower bonuses have not put an end to the culture of high remuneration in the City.

While much uncertainty remains over the future of tax and regulation in the City as we await the final recommendations of the Vickers Commission in September, we do not expect City workers to fare badly over the medium‐term.

The increasingly globalised nature of the financial services industry means that London cannot afford to be complacent about its position as a world‐leading financial centre – the ascent of Eastern financial centres such as Shanghai and in global competitiveness measures only goes to illustrate this.

Excessive regulation on bank pay, and heavy‐handedness with taxation would only accelerate this shift of financial services to the East – something that the Government recognises and is likely to constrain the extent of legislation aimed at curbing excess in the City.

“Our research shows that falling bonus payments this year are being offset by rising regular pay packets. City workers are not earning less – their earnings are merely becoming less bonus‐driven as basic pay continues to grow much faster than other parts of the economy”, says Scott Corfe, Cebr economist and co‐author of the research.
Douglas Mcwilliams, Cebr chief executive, said, “There is a risk that excessive micro‐management and regulation of pay in the City by Government could accelerate the shift in financial services from the West to the East. Our own research shows that excessive remuneration and profit in the financial sector is much better addressed through increasing competition rather than regulation”. 

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