More than 4,000 people look set to enjoy payouts of more than £1 million in the new year as the bonus pot in the City of London hits a record £8.8 billion ($16.7 billion).
The latest quarterly figures from the Centre for Economics and Business Research (CEBR) estimate that the total bonus pool will grow 18 per cent this year from the £7.4 billion paid out lat year.
Meanwhile, some 4,200 senior bankers will be taking home bonuses in excess of £1 million, a big rise on the 3,000 last year.
"Continuing strong merger and acquisition activity in 2006, which is highly bonus oriented, is driving corporate earnings up and the stock market higher," Jonathan Said, a senior economist at the CEBR..
"As a result, the value of bonuses to be paid in the coming bonus round is forecast to hit £8.8 billion, up nearly one-fifth from last year's bumper bonus round.
"Looking forward, City bonuses are likely to trend upwards," he added, "though at a slower growth rate - as an increasing number of highly incentivised private equity firms based in London continue to squeeze company costs and drive corporate profits."
The CEBR figures also suggest that the number of jobs in the City also hit a record high in 2006, topping 335,000 thanks to strong growth in accounting firms and among non- financial services such as law.
Earlier this month, research from financial recruitment company Morgan McKinley revealed that such is the demand for top staff in the City of London that investment banks are prepared to buy out the huge annual bonuses of top performers they want to poach from rivals.
The phenomenon of bonus 'buy-outs' has not been seen in the city since 2000. But with 14 per cent more new jobs on the market than there are candidates looking to move, banks are having to take expensive steps to encourage individuals to move roles before their bonus has been paid by their current employer.
Morgan McKinley also found that more than half London's investment bankers and financial services professionals expect their bonuses to be more than 50 per cent higher than last year.
