Almost two thirds of Britain's financial services firms have raised salaries for their top employees to compensate for an incoming European Union cap on bonuses.
The news comes just a fortnight after HSBC said it was considering raising its bankers' salaries around the world in response to the EU's move, which should see bonuses capped from January at 100% of salary, or 200% with special approval from shareholders.
Research conducted by recruitment group Robert Half suggests that the process has already started, with 65% of UK financial services companies reporting they had increased base salaries of star performers by an average of 20%. Nearly a fifth of companies have raised salaries by more than 30%.
Neil Owen, a director of Robert Half Financial Services, said: 'A number of large UK financial services firms have already been examining ways to offset the cap, potentially raising salaries and benefits to retain key employees. With the UK competing with other international centres for the world's top financial services talent, firms will need to strike the balance between risk and reward, with additional employee remuneration potentially creating an unstable cost structure.'
Earlier this month HSBC chairman Douglas Flint warned: 'We are looking at a whole range of things … the cap on variable pay as a proportion of fixed pay is very uncomfortable when we make our money where these restrictions are not faced by our competitors.'
Andrew Bailey, the chief executive of the new banking regulator, the Prudential Regulation Authority, has previously warned MPs that salaries across the City could rise by around £500m as a result of the cap on bonuses, which is nearing the end of its consultation stage but should affect bankers earning more than €500,000.
The Robert Half survey, which polled finance directors and chief operations officers from 100 financial services firms, also found that 60% had increased benefits for affected staff.
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