Your bonus for pounds 1bn: the high-flyers find their niche

Many City workers will get a redundancy notice rather than a fat cheque, but the top talent will prosper, says Liza Roberts

This YEAR the City of London's most valuable workers will take home about pounds 1bn in bonuses - about 30 per cent more than they did last year - even after a wave of industry consolidation and recent turmoil in world financial markets. "Optimism is high. It's a very good time to be in the City right now," said Simon Gee, manager for Robert Half International, an executive search firm.

The overall strength of the markets, together with a shortage of qualified people and the emergence of new specialist areas means that City bonuses and base salaries are rising and - if the markets continue their upward climb - will probably keep growing for at least the next few years, said Robert Flohr, managing partner at Korn/Ferry International.

At the same time, half a dozen recent industry mergers mean thousands of City employees face finding a redundancy notice, not a bonus cheque, in the inter-office mail. The merger between Swiss Bank Corp and Union Bank of Switzerland, announced this month, will result in the elimination of 3,000 London jobs, and the sales of the investment banking units of National Westminster Bank and Barclays are expected to add a few hundred more to the jobless.

"There's no question about the fact that people are going to become obsolete. In many ways [mergers] force companies to make decisions they should have made two or three years ago," said Charles Sweet, President of AT Kearney Executive Search.

Still, while jobs will be lost and expenses curtailed, the net result of the wave of industry transactions has been to increase year-end payouts by generating fee income for advisers - about $2bn this year, according to Acquisitions Monthly magazine - and guaranteed bonuses for many newly transferred employees.

"The reality is that good people always cost," Mr Flohr said. The difference this year, he said, is that the spread between the "really big earners" and the "pretty big earners" is wider than before, with the big money increasingly concentrated in the hands of a few. "There will be a weeding- out. The people on the margins will be concerned ... bonuses will be greatly awarding the people who are leading and building businesses," he said. "They've got to pay off guarantees and make the best people happy." That includes those who work in emerging markets who racked up big losses after Asian stock markets tumbled in October and November.

In fact, people working in emerging markets are likely to deposit the fattest cheques, several head hunters said. "A smart institution is not going to underpay its emerging markets people. If they don't compensate the people taking the risk - who have had a good year overall - who are they going to get to sit on their Asia desk again?" asked Flohr. "If you're committed to the business, you've got to pay through good times and bad."

Still, the tendency to pay large lump sums is one regulators would prefer to see changed. "The concern is not whether bonuses are big or small, but whether the way you remunerate people leads to corruption of internal controls," said Peter Parker, spokesman for the newly-formed City regulator, the Financial Services Authority.

The Bank of England has raised the question of whether the promise of stratospheric one-time payouts encourages traders to take risks they otherwise wouldn't. And in a set of draft industry guidelines published in July, the Securities and Futures Authority said regulated firms should "design, build, and use operating arrangements [including remuneration and bonus or other incentive systems] with a view to ensuring that they cannot corrupt the integrity of the firm, or its systems and controls."

That doesn't mean people are going to stop making lots of money, and most of it in one big check, headhunters said.

Other than those in emerging markets, people likely to receive seven- figure cheques this year are mergers advisers, having racked up a record number of transactions this year, those working on new issues in hot industries like telecommunications, experienced senior analysts for growing industries, whose numbers are in short supply, people working in esoteric areas like emerging market high-yield debt and credit derivatives, and asset managers, according to head hunters.

"The competition for talented people is hot and considerable," Sweet said. "The demand for services is on a growth curve, and while business schools are churning out people, we're not yet at an equilibrium." Mr Sweet doesn't predict the numbers of graduates will meet the needs of employers for another five years yet.

Information technology experts - who typically work on a contract basis for the big financial services firms - are also being lured to stay on with big guaranteed bonuses, said Mr Sweet. "In the run-up to 2000, those guys are making a lot of money."

Another factor driving City bonuses ever higher is the growing equilibrium between pay scales in New York and London, head hunters said. London has emerged as the financial capital of a uniting Europe, at the same time that US firms are bolstering their staff here. "All of these Americans come over here, and they don't do it just to go sightseeing," Flohr said.

Estate agents welcome the influx. "It's how a lot of our market is driven," said Peter Rollings, manager of Foxtons' South Kensington sales and lettings office. "I'm very expectant of lots of sales happening in the New Year. There's now a lot of City money sloshing around."

Arts and Entertainment
Gregg Wallace in Summer's Supermarket Secrets
tv All of this year's 15 contestants have now been named
Arts and Entertainment
Inside the gallery at Frederick Bremer School in Walthamstow
tvSimon Usborne goes behind-the-scenes to watch the latest series
Life and Style
A picture taken on January 12, 2011 shows sex shops at the Paris district of Pigalle.
newsThe industry's trade body issued the moratorium on Friday
Winchester College Football (universally known as Winkies) is designed to make athletic skill all but irrelevant
Life...arcane public school games explained
Arts and Entertainment
Could we see Iain back in the Bake Off tent next week?
tv Contestant teased Newsnight viewers on potential reappearance
Life and Style
Silvia says of her famous creation: 'I never stopped wearing it. Because I like to wear things when they are off the radar'
fashionThe fashion house celebrated fifteen years of the punchy pouch with a weighty tome
i100(and it's got nothing to do with the Great British Bake Off)
Angelina Jolie with her father Jon Voight
peopleAsked whether he was upset not to be invited, he responded by saying he was busy with the Emmy Awards
Bill Kerr has died aged 92
peopleBill Kerr appeared in Hancock’s Half Hour and later worked alongside Spike Milligan and Peter Sellers
news It's not just the world that's a mess at the moment...
footballPremiership preview: All the talking points ahead of this weekend's matches
Keira Knightley poses topless for a special September The Photographer's issue of Interview Magazine, out now
ebooksAn evocation of the conflict through the eyes of those who lived through it
The Ukip leader has consistently refused to be drawn on where he would mount an attempt to secure a parliamentary seat
voicesNigel Farage: Those who predicted we would lose momentum heading into the 2015 election are going to have to think again
Arts and Entertainment
Cara Delevingne made her acting debut in Anna Karenina in 2012
film Cara Delevingne 'in talks' to star in Zoolander sequel
Mario Balotelli pictured in his Liverpool shirt for the first time
Life and Style
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Data Scientist (SQL,Data mining, data modelling, PHD, AI)

£50000 - £80000 per annum + benefits+bonus+package: Harrington Starr: Data Sci...

SAS Business Analyst - Credit Risk - Retail Banking

£450 - £500 per day: Orgtel: SAS Business Analyst, London, Banking, Credit Ris...

Project Manager - Pensions

£32000 - £38000 Per Annum Bonus, Life Insurance + Other Benefits: Clearwater P...

KYC Analyst, Birmingham - £200-£250 p/d

£200 - £250 per day + competitive: Orgtel: KYC Analyst, Key Banking Client, Bi...

Day In a Page

Ukraine crisis: The phoney war is over as Russian troops and armour pour across the border

The phoney war is over

Russian troops and armour pour into Ukraine
Potatoes could be off the menu as crop pests threaten UK

Potatoes could be off the menu as crop pests threaten UK

The world’s entire food system is under attack - and Britain is most at risk, according to a new study
Gangnam smile: why the Chinese are flocking to South Korea to buy a new face

Gangnam smile: why the Chinese are flocking to South Korea to buy a new face

Seoul's plastic surgery industry is booming thanks to the popularity of the K-Pop look
From Mozart to Orson Welles: Creative geniuses who peaked too soon

Creative geniuses who peaked too soon

After the death of Sandy Wilson, 90, who wrote his only hit musical in his twenties, John Walsh wonders what it's like to peak too soon and go on to live a life more ordinary
Caught in the crossfire of a cyber Cold War

Caught in the crossfire of a cyber Cold War

Fears are mounting that Vladimir Putin has instructed hackers to target banks like JP Morgan
Salomé's feminine wiles have inspired writers, painters and musicians for 2,000 years

Salomé: A head for seduction

Salomé's feminine wiles have inspired writers, painters and musicians for 2,000 years. Now audiences can meet the Biblical femme fatale in two new stage and screen projects
From Bram Stoker to Stanley Kubrick, the British Library's latest exhibition celebrates all things Gothic

British Library celebrates all things Gothic

Forthcoming exhibition Terror and Wonder: The Gothic Imagination will be the UK's largest ever celebration of Gothic literature
The Hard Rock Café's owners are embroiled in a bitter legal dispute - but is the restaurant chain worth fighting for?

Is the Hard Rock Café worth fighting for?

The restaurant chain's owners are currently embroiled in a bitter legal dispute
Caribbean cuisine is becoming increasingly popular in the UK ... and there's more to it than jerk chicken at carnival

In search of Caribbean soul food

Caribbean cuisine is becoming increasingly popular in the UK ... and there's more to it than jerk chicken at carnival
11 best face powders

11 best face powders

Sweep away shiny skin with our pick of the best pressed and loose powder bases
England vs Norway: Roy Hodgson's hands tied by exploding top flight

Roy Hodgson's hands tied by exploding top flight

Lack of Englishmen at leading Premier League clubs leaves manager hamstrung
Angel Di Maria and Cristiano Ronaldo: A tale of two Manchester United No 7s

Di Maria and Ronaldo: A tale of two Manchester United No 7s

They both inherited the iconic shirt at Old Trafford, but the £59.7m new boy is joining a club in a very different state
Israel-Gaza conflict: No victory for Israel despite weeks of death and devastation

Robert Fisk: No victory for Israel despite weeks of devastation

Palestinians have won: they are still in Gaza, and Hamas is still there
Mary Beard writes character reference for Twitter troll who called her a 'slut'

Unlikely friends: Mary Beard and the troll who called her a ‘filthy old slut’

The Cambridge University classicist even wrote the student a character reference
America’s new apartheid: Prosperous white districts are choosing to break away from black cities and go it alone

America’s new apartheid

Prosperous white districts are choosing to break away from black cities and go it alone