Bonus row re-ignited as City shells out another £14bn

The average financial sector worker got a bonus of £12,500 last year. Cue much wailing and gnashing of teeth...

by James Taylor
Last Updated: 19 Aug 2013
At a time when the eurozone is going to hell in a handbasket, and most of us are feeling a lot poorer than this time last year, the last thing people will want to hear is that bankers - some of whom, after all, were responsible for getting us into this mess - are still making out like bandits. But that's the obvious interpretation of the latest bonus figures from the Office for National Statistics: apparently, the financial sector paid out £13.6bn in bonuses last year. That's about 40% of the total paid out across the economy, despite the sector only accounting for about 4% of the workforce. A damning indictment of the Government's so-called crack-down on the City's bonus culture?

There's certainly no sign of the sector pulling in its horns. This was about the same amount it shelled out in bonuses last year (the average payout is down slightly, but only because the number of people it employs is up slightly). And here's a rather galling comparison: the average financial worker took home a £12,500 bonus, while the private sector average was £1,670, and the public sector a measly £180. When you consider that the £12,500 figure is an average across the whole sector, and thus includes lots of junior and administrative staff too, it's clear that those at the top of the tree are still doing very nicely, thank you.

Naturally, this news has gone down like a lead balloon with union leaders. 'The Chancellor's austerity message has failed to reach the City,' said the TUC's Brendan Barber; 'The Government is doing nothing to clean up the City bonus culture at a time when it is demanding huge sanctions from the public sector,' said Unison's Dave Prentis. And Lib Dem peer Lord Oakeshott reckons it proves the Government has failed to get to grips with the problem (and the Treasury's riposte - that at least the number has gone up - was admittedly a bit feeble).

There's clearly more nuance to this argument than some would have us believe. For instance, there's nothing wrong with paying out big bonuses, as long as there's a genuine link to performance; in fact, judging by those averages, most organisations aren't making enough use of them. And we shouldn't tar the whole financial sector with the same brush: it's not just City bankers we're talking about here, even if it does make for a better soundbite for Barber et al. But the sheer size of this number - coming despite the best efforts of the bank levy and Project Merlin – does suggest that the Government still has a lot of work to do if it's serious about changing the City's culture.

Incidentally, speaking of bonuses, mega-payer Goldman Sachs said yesterday it was planning to cut about 1,000 jobs in an effort to save money; apparently, salaries are going up to compensate for lower bonuses, so it's having to reduce headcount to keep costs down. Hearts will bleed, we're sure.

Bonus row re-ignited as City shells out another £14bn

 

The average financial sector worker got a bonus of £12,500 last year. Cue much wailing and gnashing of teeth...

 

 

At a time when the eurozone is going to hell in a handbasket, and most of us are feeling a lot poorer than this time last year, the last thing people will want to hear is that bankers - some of whom, after all, were responsible for getting us into this mess - are still making out like bandits. But that's the obvious interpretation of the latest bonus figures from the Office for National Statistics: apparently, the financial sector paid out £13.6bn in bonuses last year. That's about 40% of the total paid out across the economy, despite the sector only accounting for about 4% of the workforce. A damning indictment of the Government's so-called crack-down on the City's bonus culture?

 

There's certainly no sign of the sector pulling in its horns. This was about the same amount it shelled out in bonuses last year (the average payout is down slightly, but only because the number of people it employs is up slightly). And here's a rather galling comparison: the average financial worker took home a £12,500 bonus, while the private sector average was £1,670, and the public sector a measly £180. When you consider that the £12,500 figure is an average across the whole sector, and thus includes lots of junior and administrative staff too, it's clear that those at the top of the tree are still doing very nicely, thank you.

 

Naturally, this news has gone down like a lead balloon with union leaders. 'The Chancellor's austerity message has failed to reach the City,' said the TUC's Brendan Barber; 'The Government is doing nothing to clean up the City bonus culture at a time when it is demanding huge sanctions from the public sector,' said Unison's Dave Prentis. And Lib Dem peer Lord Oakeshott reckons it proves the Government has failed to get to grips with the problem (and the Treasury's riposte - that at least the number has gone up - was admittedly a bit feeble).

 

There's clearly more nuance to this argument than some would have us believe. For instance, there's nothing wrong with paying out big bonuses, as long as there's a genuine link to performance; in fact, judging by those averages, most organisations aren't making enough use of them. And we shouldn't tar the whole financial sector with the same brush: it's not just City bankers we're talking about here, even if it does make for a better soundbite for Barber et al. But the sheer size of this number - coming despite the best efforts of the bank levy and Project Merlin – does suggest that the Government still has a lot of work to do if it's serious about changing the City's culture.

 

Incidentally, speaking of bonuses, mega-payer Goldman Sachs said yesterday it was planning to cut about 1,000 jobs in an effort to save money; apparently, salaries are going up to compensate for lower bonuses, so it's having to reduce headcount to keep costs down. Hearts will bleed, we're sure.

Find this article useful?

Get more great articles like this in your inbox every lunchtime

Subscribe

Get your essential reading delivered. Subscribe to Management Today