Page last updated at 23:05 GMT, Tuesday, 20 October 2009 00:05 UK

UK bank bonuses 'to rise by 50%'

Cash exchanging hands
Excessive bonuses have been cited as one of the causes of the downturn

City bank bonuses for 2009 will rise by 50%, a report predicts - a year after a huge financial bail-out.

The Centre for Economics and Business Research (CEBR) said payouts would hit £6bn, up from £4bn in 2008, because of rising profits and less competition.

However, they would be well below the £10.2bn paid in 2007, it said, adding fewer people now worked in the City and that early 2009 was poor for the banks.

The recent G20 summit wanted bonuses linked to long-term performance.

'Damaging'

However, the Pittsburgh meeting produced no plan for general caps on the amount banks could pay out - something that some European governments wanted.

And the CEBR's chief executive, Douglas McWilliams, said measures to cut bonuses would be unlikely to work.

"Any attempt to deal with bonuses is likely to be either unsuccessful or very damaging, unless it addresses the issue of lack of competition which is at the heart of the sharp rise in profitability," he said.

"Banks' profits have risen very sharply this year, reflecting a lack of competition in the market. It is not surprising that the increase in bonuses has matched these higher levels of profitability."

The organisation had earlier said bonuses would only be £4bn. But the report's co-author, CEBR economist Benjamin Williamson, said that while bonuses were beginning to bounce back, they would "not reach the levels of 2007 anytime soon".

He forecast the payouts would be £6.7bn in 2010, £7.1bn in 2011 and £7.5bn in 2012.

Excessive bonuses have been cited as one of the causes of the world economic downturn - with bankers in the UK and beyond accused of taking greater risks driven by potential rewards.



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