Chris Blackhurst: Time to toast their good luck? With so many possible takeover deals on the table, bankers can almost smell those massive bonuses
Any hope the City has learned much from the past five years will surely be dashed as the bonus season takes hold
Well, my pals weren't wrong. For a while now I've been hearing that plenty of deals were in the offing.
My reaction was to scoff. Bankers always like to talk up their book – have you ever met one who has said he's got nothing to do? The "magic circle" lawyers are the same – they're forever busy, or so they claim.
So when they all said watch this space, there's a load of M&As coming down the pipe, I was sceptical. Most of the people I knew on the other side of the fence, clients on the front line, were gloomy. They all said how content they were to sit on their cash, how they were in no rush to spend.
Then, no sooner has the year begun than we've been treated to a crop of announcements. Suntory is buying Jim Beam whiskey, Amec is purchasing Foster Wheeler, Tilda rice has been bought by a US firm, Time Warner Cable is the subject of a $60bn (£36bn) bid by industry rival Charter Communications.
Economy-wise, the Bank of England has hit the Government's 2 per cent inflation target for the first time since November 2009. Rises in food prices have eased, which is good news for consumers. Jobs are being created and the spectre of interest rate increases has receded. Recovery, albeit fragile, is under way.
Those twin arbiters of the City worker's mood, the stock market and house prices, are both buoyant. The FTSE 100 had its best performance for four years in 2013, while the value of houses is expected to rise 8 per cent across the board in 2014.
No wonder there is a happy buzz again in the bars of the Square Mile and Canary Wharf. With companies sitting on oodles of cash, the stage is set fair for more takeovers – some of them spectacular, if Killik & Co's predictions prove correct. Those on their analysts' hit-list of possible victims include Smith & Nephew, BG, Imperial Tobacco and J Sainsbury.
Hands are being rubbed in anticipation of what lies ahead – and the commissions and bonuses that await. Any hope that the City has learned much from the events of the past five years will surely be dashed as the bonus season takes hold and the deals kick in. There has been no significant altering of attitudes towards pay. The sense of entitlement is as entrenched as it ever was.
Quite what it's based upon is a mystery to me. No other area of society is so dependent on the bonus culture. Of course, jobs elsewhere pay annual bonuses, but they're usually a fraction of the base salary. In financial services, they're a multiple of the base salary.
It's not uncommon for City folk to receive a payout of five, six, seven times their salary. More, if they're in the stellar bracket. Such a payment is expected, and accepted. Why? What began as a consequence of Big Bang and the end of partnerships, and the arrival of the American banks and their desire to attract traders when there was a shortage, has developed beyond recognition and without justification. These are bonuses, let us not forget, to people for doing their jobs. Not for doing something exceptional beyond the call of duty, not for going the extra mile, not for displaying extraordinary ability.
At a bulge-bracket bank, you sit and wait for the business to come. And come it does. Obviously, it's a competitive market, but such is the dominance of a small group of big names, such is the likelihood of conflicts of interest, that the work will flow in. And you can look forward to a bonus many times your actual salary.
The system is wrong. Among the biggest winners this year will be those who advised Vodafone on the sale of its stake in the US mobile operator, Verizon. It was an £80bn transaction – but what did those involved really do that would have been different had it been an £80m or £8m deal?
The answer, whatever they might claim, is nothing at all. Yet they're in line to collect a fee based on a percentage of £80bn. If this occurred in any other walk of life, the City and its legions of economists, consultants, analysts and lawyers, would be the first to complain. They would produce learned papers attacking such a handout as obscene and without any economic basis.
Instead, they stay silent. I've lost count down the years of how many people I've come across who retired on the back of another huge deal, coincidentally also involving Vodafone. This was the UK phone group's acquisition of Mannesmann in 2000 for £112bn. They netted so much they were able to jack in their jobs.
Again, you wonder at the madness of it all: you reward someone so handsomely for doing their job that they're able to turn round and quit, and be lost to the bank. It does not make sense, but that's what happens.
Soon, the EU has decreed, bonuses will be capped at 50 per cent of salary, or 100 per cent with shareholder approval. Is the City taking this on the chin? What do you think? All the chat is of wheezes to get around the cap. Salaries will be bumped up, bonuses will be deferred or not paid directly in cash. Whatever the scheme, the purpose will be to avoid a rule brought in as a result of City excess and recklessness.
The City is trying to paint it in EU terms, that this is an example of petty interference from the bureaucrats of Brussels. Such a claim ignores why the EU felt it had to act – the City conveniently sweeps its own misdemeanours under the carpet.
One argument being made is that the City has learned and listened, and that this year, for instance, those pocketing the eye-watering amounts are fewer, and that many bank workers will receive a "doughnut" of a bonus – that is to say, nothing extra at all. To which the reply should be a loud harrumph. The truth is that the banks are still paying staff members the sort of sums that others can only dream of, and, what is more, those bankers expect to be paid them.
It's the entitlement that must change. Bankers see themselves as bigger, smarter, more important than their clients and pay themselves accordingly. They believe that as a right, they must possess a mansion in the Home Counties, a country house, a chalet, villa, a yacht, football season tickets and debentures at Wimbledon, Lord's, Twickenham and Wembley. Their children have to be educated at boarding schools costing £30,000 a year.
They require offices that are more opulently appointed than most corporate or government headquarters. Inside, on the top floors, they dine on food prepared by the finest chefs and drink the best vintage wines. They house art collections that would do any gallery or museum proud. They truly believe they're above the rest of us, that they are indeed Masters of the Universe.
I'd like to say I detect an acknowledgment that they've gone too far, that they must change and mend their ways. I have, in some, but only in a small minority. For the bulk, it's very much business as usual. As we go into 2014 and what looks like a bumper year ahead, that's a very depressing prospect.
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