City salaries and bonuses soar at double national average levels

CITY pay is soaring says the IFS — good news for finance workers but a possible cause of greater inequality.

The think tank says City pay is rising at more than double the national average at levels not seen in the last decade, based on payroll data from HMRC.

The IFS says: “By February 2022, average pay in finance was 31% higher than in December 2019 in cash terms, whilst average pay across all sectors was just 14% higher.”

Bank profits have lately been rising and should keep going as interest rates rise, increasing margins. That suggests bonuses this year should be higher too.

A report from the High Pay Centre says most people think executives are paid too much. Six out of 10 people think CEOs should be paid no more than 10 times the average employee, its research shows.

High Pay Centre director Luke Hildyard said: “The difference between the actual pay of chief executives and other leading professionals, and what the public thinks would be a fair and proportionate level perhaps reflects the concerning extent to which the lives of those at the top and those of everybody else have become so far removed from each other. That’s probably not a healthy development.”

The IFS says: “The reversal of pre-pandemic trends towards greater pay equality may imply higher inequality in household incomes in the years to come.”

According to the IFS, this rise in banker pay may not be justified. It reports: “It is not obvious why pay in the finance sector has increased so much since 2019. Output in the finance sector as a whole does not appear to have increased more than in other sectors.”