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Double your money, the City poachers are back

No doubt about it, City salaries are once again a "phenomenon". The securities industry is enjoying its best year since 1993, when 100 London employees of Goldman Sachs took home $1m apiece or more. And if that were not enough to send salaries soaring, there are also some aggressive new players in the market place, most notably Deutsche Morgan Grenfell, prepared to pay apparently silly money for sometimes quite mediocre talent. In combination, the two factors make a highly potent cocktail.

Nor is this a phenomenon confined to the star traders and analysts of the premier league. The first and second divisions are doing pretty nicely out of it too, thank you very much. Salaries across a wide spread of posts and companies are achieving unprecedented levels. Less than 150,000 people in Britain earn pounds 100,000 a year or more; getting on for a half of these people may be in financial services of one form or another.

The rights and wrongs of this are one thing. Some will see it as a symptom of everything that's wrong with Britain, while others will view it as an example of British success. But whatever you think, it certainly ill becomes investment banks to complain about poaching and spiralling salaries, as increasingly their senior executives do. For a start it's pure hypocrisy. Most of the critics continue to be guilty of "name your price" poaching tactics when it comes to the superstars.

Investment banks are in any case pure money-making machines. The best of them provide their people with state of the art IT, as much capital as they need, and a top-drawer client list, but essentially it is still the traders, salesmen and analysts that make it happen. If the salaries are silly, it is because the margins and returns are silly too. Plainly it makes sense to poach, say, the top rated telecoms analyst at some insane salary if by doing so it helps win a major international telecoms privatisation issue which pays an insane fee. The problem lies not so much with what investment bankers are prepared to pay as with what their clients are prepared to pay them.

As for the proprietary trading operations, where the really big bucks are made, it's a free country and there's a going rate for the job. In a bumper year like this one, it's bound to be high. Deutsche Morgan Grenfell will no doubt live to rue the day it saddled itself with the very high fixed-cost salary structure it is presently building up. Many of the new recruits coming in at double their previous salaries are not stars at all; they belong to the marzipan layer of City traders and analysts. But then if it all goes wrong, that's Deutsche Bank's lookout.