The chickens have finally come home to roost.
Total bonus payouts in the City (London) for 2012/13 are expected to fall year on year by a further 48% to £2.3bn from a final figure of £4.4bn for 2011/12 and a peak of £11.6bn in 2007/08.
These are the key findings of updated research into the 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.
The report confirms Cebr’s earlier estimate for payments in the 2011/12 bonus season £4.4bn, close to the £4.2bn estimated by Cebr six months ago.
The important news is that a further sharp fall is predicted for 2012/13 – bonuses paid out 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. Using Cebr’s model which is based on City activity and which forecast bonuses for last year fairly accurately, the predicted level of bonus for 2012/13 is a further sharp fall to £2.3bn. Bonuses were last close to this level at £2.5bn in 1998.
Douglas McWilliams, Cebr chief executive, comments: '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’.
'More active shareholders are pressing management to remunerate in line with the economic situation. And our estimates of City activity – reflected in the sharp fall in the number of City jobs – means that pay has to fall to reflect the underlying economic reality.
'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'.
City bonus payouts
Year, £ million
2002/03 - 3,329
2003/04 - 6,400
2004/05 - 6,950
2005/06 - 9,653
2006/07 - 11,383
2007/08 - 11,565
2008/09 - 5,332
2009/10 - 7,336
2010/11 - 6,749
2011/12 - 4,402
2012/13 - 2,289