This week British bankers will start collecting the biggest bonuses since before the 2008 global financial crisis as their employers fight an “increasingly intense war for talent”.
As most Britons face the biggest squeeze on their incomes since at least 1990, already very highly paid bankers are celebrating “particularly obscene” bonuses in the City’s pubs and wine bars.
“We have had quite the run on champagne – the poshest champagne we stock,” says James, a bartender at the New Moon on the streets of Leadenhall Market near the headquarters of many of the City of London’s banks. “They come here to celebrate when they get told their ‘number’ – the numbers seem to have been particularly obscene this year.”
London’s mergers and acquisitions (M&A) bankers earned total fees of $3.5bn (£2.6bn) in 2021, according to research by financial data provider Refinitiv for the Guardian. It is the highest annual total for M&A banker fees paid since Refinitiv’s records began in 2000, fuelled by a frenzy of corporate takeovers sparked by a flood of private equity cash and acquisitive American buyers preying on undervalued British targets.
That money is now set to be returned to bankers in their bonuses. London’s big four banks – HSBC, Barclays, Lloyds Banking Group and NatWest – are expected to pay out bonuses totalling more than £4bn when they report their annual results in the next fortnight. Combined, the banks’ annual profits are expected to exceed £34bn – the most since 2007 in the boom before the financial crisis.
The bankers’ huge paydays come days after the governor of the Bank of England, Andrew Bailey, who was paid £575,538 last year, called on workers across the country not to ask their bosses for pay rises to help control inflation, which has soared to a 30-year high of 5.4%.
Gary Smith, general secretary of the GMB union, which represents 600,000 mostly frontline workers, said: “These sky-high banker bonuses are a kick in the teeth for everyone suffering with the cost of living crisis. I hope Andrew Bailey tells his banking mates to show the same ‘restraint’ he so readily demands from underpaid workers in the rest of the economy.
“Essential workers, like our nation’s carers, often earn pennies above the minimum wage,” Smith said. “Mr Bailey should step out of his banking bubble and shadow these workers to see the people who actually deserve a proper pay rise.”
The bumper bonuses will tip several hundred more UK bankers into the EU’s “high earners” warning report which details every banker earning more than €1m (£835,000) a year. The European Banking Authority (EBA) found that 3,519 bankers working in the UK earned more than €1m-a-year last year – more than seven times as many as those working in Germany which has the second highest number of €1m-a-year bankers.
The EBA figures show 27 UK bankers earned more than €10m in 2019 (the latest year available). Two UK-based asset managers were paid between €38m and €39m, and one merchant banker was paid €64.8m. That banker received fixed pay of €242,000, topped up with a bonus of €64.6m.
Frances O’Grady, the general secretary of trade union body the TUC, said the huge increase in bankers’ pay was “an insult to working families across Britain”.
“While millions struggle with the cost of living, executive bankers are set to receive yet another cash windfall,” she said. “At a time when workers are being told not to ask for a decent pay rise, no such restraint is being asked of the City. We should be holding down bonuses, not ordinary people’s wages.”
Luke Hildyard, the director of the High Pay Centre, which campaigns for executive pay restraint, said: “Decades of economic deference to the super rich have brought us to a point where bankers are raking in historic pay awards while the rest of the country is crippled by rising prices and wage stagnation.
“This wealth isn’t ever going to trickle down without action from policymakers. It’s in the interests of everybody, not least the banks’ shareholders, customers and lower-paid workers who ultimately bear the cost of these awards, that we strengthen employment rights, corporate governance and progressive taxation to build an economy that works for everyone.”
Figures released on Tuesday by the Office for National Statistics (ONS) showed that average pay in the public sector rose by 2.6% between October and December 2021, while those working in business and finance saw their pay grow by 8.1% due to “an increase in bonus payments”.
NatWest, the first of the banks to report its results, is expected on Friday to post a £4bn profit for 2021 compared with a £351m loss in 2020. The bank, which is still more than 50% owned by the taxpayer following its bailout during the financial crisis, is expected by analysts to pay bonuses of almost £300m up from just over £200m last year.
Barclays is expected by City analysts to report profits of just over £8bn next Wednesday, which would lead to bonus payouts of more than £1.9bn – up £300m on the previous year. A big chunk of the bonus pool will be paid to Jes Staley, Barclays’ former chief executive who quit in November amid an inquiry into his links to convicted sex offender Jeffrey Epstein. Staley is still in line for bonus payments of up to £22m over the next six years if the bank hits its profit and share price targets.
Lloyds, which paid no bonuses for 2020, is expected to pay out hundreds of millions in bonuses for 2021 as profits exceed analysts’ expectations.
HSBC, which cut its bonuses by 15% last year but still paid out almost £2bn, is expected to significantly increase its pool this year and double bonuses paid to junior investment bankers. Greg Guyett, HSBC’s co-head of the global banking and markets division, last month said that HSBC was feeling the industrywide “upward pressure” on pay. “We’ve got to keep pay across the board competitive,” he said.
It is not just in the UK that banks are raising bonuses in a global war for talent in the highly competitive M&A world. French bank Société Générale last week said it would “massively” increase its bonuses in order to attract and retain talent.
In Germany, Christian Sewing, chief executive of Deutsche Bank, the nation’s largest bank, said last month: “We are very concerned about the increasingly intense war for talent and the wage developments in our industry. But it is also clear that we cannot and do not want to avoid this competition, because we too want to have and keep the best talent in our bank.”
