Despite a fall in bonus payouts in 2010/11, growth in City workers' pay continues to outpace the rest of the UK, according to research from the Centre for Economics and Business Research (Cebr).
The London and City Prospects research found that bonuses in the City fell by 8% for 2010/11 from £7.3 billion to £6.7 billion.
However, City employees’ pay packets were boosted as Cebr estimates that average pay in the first quarter of 2011 was 7% higher than a year ago, and much higher than growth of just over 2% for the whole UK.
Cebr said that 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, as demonstrated by the ascent of Eastern financial centres such as Shanghai and Singapore in global competitiveness measures, for example.
According to the consultancy, 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.
Scott Corfe, economist at Cebr 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.”
Douglas McWilliams, chief executive of Cebr, 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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