UK banks are preparing a 50% rise in annual bonuses to £6bn as bank profits make a swift recovery, a leading research group said today.
Better-than-expected second and third quarter figures from the banking industry will result in a leap from the £4bn seen in January's annual bonus round, the Centre for Economics and Business Research (CEBR) said.
The forecast angered Liberal Democrat Treasury spokesman Vince Cable, who said the big increase did not reflect the particular contribution made by bankers to the economy.
He added: “These bonuses are coming from the fact that banks are earning money from substantial Government borrowing and are able to earn bigger profits because there is less competition.”
The CEBR report comes a week after bumper earnings figures from US banks JP Morgan and Goldman Sachs.
Goldman revealed it was setting aside $16.7bn (£10.2 bn) for the first nine months of 2009 to cover compensation and benefits — up 46% on a year ago.
The CEBR has upped its prediction made in April from £4.1bn to £6bn after the recent cheer from UK and US banks.
But the CEBR said despite the recent bounce back, it will still be at least five years before finance sector bonuses return to their pre-crisis levels.
A mammoth £10.2bn was paid out in 2007 just before the troubles hit, according to the CEBR.
Today's report forecasts a steady increase to around £7.5bn in 2012 as profits recover and jobs gradually return to the sector.
Douglas McWilliams, chief executive at the CEBR, said: “Banks profits have risen very sharply this year, reflecting a lack of competition in the market.
“It is not surprising that the increase in bonuses has matched these higher levels of profitability.”
The financial crisis has seen a number of banking players fall by the wayside and merge to survive, which has lessened competition across the industry worldwide.