High-flyers celebrating City's sky-high bonuses

Workers the City, London's financial center, are celebrating record annual bonuses that fill government coffers with billions of in tax receipts but also help fuel inflation that weighs on many ordinary employees.

Following year in which stock markets and commodity prices have hit record peaks, City workers have seen their bonus payments jump by an average of 15 percent to 20 percent.

US bank Goldman Sachs is reported to have awarded one London-based trader an unprecedented bonus of ?50 million (US$98 million) for his performance this year.

Each December, the British public hears about the City's latest "golden boys", and girls, who receive the biggest bonuses that are lavished on plush houses, stylish sports cars and exquisite jewelery.

Meanwhile food and drink is not immune to the spending sprees.

Last year, Goldman Sachs employees entered a London bar and requested the most expensive beverage. A new cocktail, the Magie Noir (Black Magic) was born, costing about ?333 a glass owing to ingredients including vintage cognac and champagne.

According to the Center for Economics and Business Research, City workers are reaping bonuses totalling ?8.8 billion for their work this year. Among the beneficiaries are 4,200 workers who are each taking home ?1 million before tax.

The huge salaries and bonuses earned by traders and financial analysts contrast enormously with the wages paid to those cleaning their offices and working in nearby cafes.

Most of these people are earning the minimum wage of ?5.35 per hour, an inadequate sum according to London Mayor Ken Livingstone.

The mega City bonuses, meanwhile, are considered to be a major factor behind the soaring cost of London homes. Housing values have tripled over the last decade.

"Plenty of buyers -- Not enough Property -- Record Prices!" read a recent flyer recently pushed through letter-boxes in one plush London district.

London First, which campaigns to make Britain's capital the best place to work, has voiced concern about state workers, including teachers, nurses and postal staff, who do not possess even half the salary required to get a home loan that would enable them to buy an average property in the British capital. An average three-bed house in London costs about ?300,000.

Meanwhile in a bid to fight rising inflation, the Bank of England increased British interest rates by half a percentage this year to 5 percent and that has resulted in higher repayment costs for people with home loans.

"There will be real anger if further interest rate rises flow from overheating in the South East [of England] caused by the impact of top executive pay and mega-bonuses in the City," Brendan Barber, head of the Trades Union Congress, said in a atatement.

Economists already predicting that the Bank of England will hike borrowing costs to 5.25 percent in February, in part owing to higher salaries and bonuses.

A recent study by US investment bank Merrill Lynch showed that one factor attracting foreign bankers to London is the chance to watch London football giants, such as Arsenal and Chelsea.

It costs at least ?50 for a good seat to watch these teams live, which is far higher when compared with ticket prices to see other European giants, such as Bayern Munich or Barcelona.

John Stuttard, who as lord mayor of the City of London takes a lead in promoting the City abroad, wrote last week in the Financial Times newspaper that it would take a bus driver or teacher about 2,000 years to earn the ?50 million pound bonus won by the Goldman Sachs trader.

In defense of the mammoth bonuses, however, he pointed out that during this year, the City has contributed 12 percent of Britain's tax receipts that help to build many key public services, including hospitals, schools and roads.

"Bonuses help to attract and keep the most highly skilled personnel and if London or New York or anywhere else stopped attracting such star performers they would decline as world cities -- and so would their wider economies," Stuttard added.

However experts at the University of Buckingham argue that if bonuses were not so high many bankers would be attracted to work in important sectors where there is a large shortage of expertise, such as engineering and science.