£42bn paid out in bonuses but City loses out

More than £42bn was paid out in bonuses in the last financial year, an increase of 2.7 per cent on the previous 12 months, despite a slump in payments by finance and insurance firms.

New figures from the Office for National Statistics showed that £13.6bn of the total was paid in the finance industry in 2014/15, down by 9.6 per cent on the year.

Bonuses in finance and insurance firms have fallen “considerably” since the downturn in 2007/8, down by £5bn, while in the rest of the economy the figure has gone up by a similar amount.

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The biggest rise in bonuses came in professional, scientific and technical services. The average bonus per employee remained at around £1,500, falling by £800 to £13,100 among finance staff, the ONS calculated.

Bonuses in private firms increased by 4.3 per cent to £41.7bn, accounting for the vast majority of the £42.4bn total.

The research showed that bonuses made up over a fifth of total pay in the finance and insurance industry, down from a quarter the previous year.

James Sproule, chief economist at the Institute of Directors, said: “Bonuses are a fundamental feature of a flexible labour market and make up a key component of the remuneration mix.

“They allow businesses to reward staff for their achievements over a set period of time and are often directly linked to an individual’s or the company’s performance. This means when times are good, companies can share profits with staff without increasing their labour costs to an unsustainable level.

“Today’s figures, which show both bonuses and base salaries continue to rise, are good news.”