Turmoil in global markets this month is expected to have blown a large hole in London bankers' bonuses, with knock-on effects for the British economy, experts believe.
"The true extent of the exposure to the subprime mortgage market is yet to be felt and we still think there's more volatility to come with the markets," believes Jonathan Said from the Center for Economics and Business Research. "We do expect this to have a big impact on jobs and bonuses in the City."
Bankers in the Square Mile, London's financial district, had been expected to receive bonuses totaling around £10 billion (US$20 billion) thanks to buoyant market conditions and record volumes of mergers and acquisitions.
But the current credit crunch caused by the crisis in the US home loans sector could see banks tighten their belts and reduce these Christmas presents by between 10 percent to 15 percent, and even by 25 percent to 50 percent for the best paid, experts believe.
And for some bankers a lower bonus is the least of their worries if the recent slowdown in mergers and acquisitions activity continues and causes investment banks to cut jobs. Some economists predict that up to 5,000 employees could be shown the door.
Out-of-pocket investment bankers also means less money sloshing around the wine bars of the Square Mile and London's luxury goods stores, with ripple effects detectable further afield in the British economy.
"If City workers lose their jobs, it's not just the restaurants and champagne bars that will be affected, but also the people that work in those bars and restaurants," said Fionnuala Earley, Nationwide Building Society's chief economist. "It will cause a correction in overall spend and employment as well."
But the sector that could be the biggest loser is the top end of Britain's property market, where investments by City bankers have been a driving force behind the recent giddy price rises.
In March, estate agents Savills said that the bumper round of City bonuses seen at the start of the year had boosted the average price paid for a house in central London by 10 percent to £1.45 million.
But this is no crisis, analysts say.
The effect on the overall British economy, and even on property prices, will most likely be negligible, and with four months left of the year there is time for markets -- and bonuses -- to bounce back, said Vicky Redwood, UK Economist at Capital Economics.
"Assuming that the worst of the market turmoil is now behind us, we doubt that the recent developments will materially dent growth in either the financial sector or the economy as a whole," Redwood said.
High City bonuses "have not been the only factor behind the strength of the London housing market: an increase in overseas buyers and high immigration have also contributed.