Square Mile bonuses to top £7.5bn this winter

2006

Bonuses in the City of London are set to total some £7.5bn this winter, up 16.2 per cent from the £6.4bn paid out last winter, according to latest estimates.

The calculation by the Centre for Economics and Research was reached by crunching the numbers and trends when it comes to City activity and jobs.

"There appears to be a reasonable correlation between these trends and City bonuses," said the CEBR.

The average bonus will be £23,000, it estimated, but stressed there is likely to be a huge variation in what City high-flyers are pocketing this winter.

Some reports have indicated that as many as 3,000 City workers will receive bonuses in excess of £1m.

The prime causes for the rise in bonuses are simple enough: a rise of more than 10 per cent in stock market activity and of more than 20 per cent in merger and acquisition activity in 2005.

The CEBR has in the past calculated that roughly half of such bonuses end up being ploughed back in the UK higher end property market, most of it in London and the south-east of England.

The London property market grew by 6.7 per cent last year and healthy bonuses will only serve to fuel that growth this further, argued the CEBR.

Such bonuses also commonly get spent on cars and plastic surgery, it added.

The rise in City activity had also led to the creation of an extra 9,500 jobs in the City last year, with the total now reaching 35,000 – the first time it has gone beyond the previous peak of 324,200 reached in 2000, just before the dotcom crash.

The growth shows no sign of slowing this year, said the CEBR.

For this year, a further 6,300 City jobs would be created and there would be a continuing rise in City activity.

"If these predictions are justified, the model indicates that there could be a further double digit rise in City bonuses next winter," said CEBR.