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.
Beijing’s continued provocations in the Taiwan Strait reveal its intention to unilaterally change the “status quo” in the area, the US Department of State said on Saturday, calling for a peaceful resolution to cross-strait issues. The Coast Guard Administration (CGA) reported that four China Coast Guard patrol vessels entered restricted and prohibited waters near Kinmen County on Friday and again on Saturday. A State Department spokesperson said that Washington was aware of the incidents, and urged all parties to exercise restraint and refrain from unilaterally changing the “status quo.” “Maintaining peace and stability across the Taiwan Strait is in line with our [the
EXTENDED RANGE: Hsiung Sheng missiles, 100 of which might be deployed by the end of the year, could reach Chinese command posts and airport runways, a source said A NT$16.9 billion (US$534.93 million) project to upgrade the military’s missile defense systems would be completed this year, allowing the deployment of at least 100 long-range Hsiung Sheng missiles and providing more deterrence against China, military sources said on Saturday. Hsiung Sheng missiles are an extended-range version of the Hsiung Feng IIE (HF-2E) surface-to-surface cruise missile, and are believed to have a range of up to 1,200km, which would allow them to hit targets well inside China. They went into mass production in 2022, the sources said. The project is part of a special budget for the Ministry of National Defense aimed at
READY TO WORK: Taiwan is eager to cooperate and is hopeful that like-minded states will continue to advocate for its inclusion in regional organizations, Lai said Maintaining the “status quo” in the Taiwan Strait, and peace and stability in the Indo-Pacific region must be a top priority, president-elect William Lai (賴清德) said yesterday after meeting with a delegation of US academics. Leaders of the G7, US President Joe Biden and other international heads of state have voiced concerns about the situation in the Strait, as stability in the region is necessary for a safe, peaceful and prosperous world, Lai said. The vice president, who is to be inaugurated in May, welcomed the delegation and thanked them for their support for Taiwan and issues concerning the Strait. The international community
COOPERATION: Two crewmembers from a Chinese fishing boat that sank off Kinmen were rescued, two were found dead and another two were still missing at press time The Coast Guard Administration (CGA) was yesterday working with Chinese rescuers to find two missing crewmembers from a Chinese fishing boat that sank southwest of Kinmen County yesterday, killing two crew. The joint operation managed to rescue two of the boat’s six crewmembers, but two were already dead when they were pulled from the water, the agency said in a statement. Rescuers are still searching for two others from the Min Long Yu 61222, a boat registered in China’s Fujian Province that capsized and sank 1.03 nautical miles (1.9km) southwest of Dongding Island (東碇), it added. CGA Director-General Chou Mei-wu (周美伍) told a