City pay packets offset bonus falls
City workers are still earning bumper pay packets as rising regular wages offset falling bonuses, research published on Monday said.
Bonus payouts in the City for the 2010/11 financial year fell by 8% to £6.7 billion, down from £7.3 billion in the previous fiscal year, the Centre for Economics and Business Research (Cebr) said.
But Cebr estimates average regular pay for City workers in the first quarter of 2011 was 7% higher than a year ago and much higher than growth of just over 2% for the UK as a whole.
Scott Corfe, Cebr economist and co-author of the research, said: "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."
But Cebr warned excessive regulation on bank pay and heavy-handedness with taxation would drive financial services away from London. The think-tank said 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.
But Cebr said the Government recognises this and is likely to constrain the extent of legislation aimed at curbing excess in the City.
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."
The Government-appointed Independent Commission on Banking (ICB) will publish final recommendations in September, following an interim report earlier this month, and uncertainty over the future of tax and regulation will remain until the findings are released.
In the interim report, the ICB called for retail business to be ring-fenced from so-called "casino" banking to protect savers and borrowers in the event of a future crisis.