Bonuses paid to the UK’s bankers, insurance brokers and other financial sector workers have hit a record high and are rising more than six times faster than average wages in the UK, unions have found.
The Trades Union Congress said its analysis suggested that the City’s bumper executive bonuses of the pre-financial crash era are back, even as much of the country struggles with a soaring cost of living that is outstripping pay rises.
The analysis of official figures showed bonuses in the financial and insurance sector grew by 27.9% over the last year, while average wages in the same period grew by just 4.2%. Nearly £6bn was paid out in City bonuses in March alone.
Frances O’Grady, the general secretary of the TUC, said: “There is no justification for such obscene City bonuses at the best of times – let alone during a cost-of-living crisis. While City executives rake it in, millions are struggling to keep their heads above water.
“Working people are at breaking point, having been left badly exposed to soaring bills after a decade of standstill wages and universal credit cuts. Ministers have no hesitation in calling for public sector pay restraint, but turn a blind eye to shocking City excess. It’s time to hold down bonuses at the top – not wages for everyone else.”
O’Grady called for a series of measures to rein in City bonuses and push up wages across the economy. They include introducing maximum pay ratios, so that bonuses are no more than 10% of total pay; ensuring that bonus schemes are open to all staff on the same terms; and ensuring workers are included on company pay committees.
Last month the Institute for Fiscal Studies thinktank found that the return of bumper finance industry payouts meant the top 1% highest-paid workers were pulling further away from the rest of the UK workforce in the biggest boom in City bonuses and pay since the 2008 financial crisis.
The average bonus awarded in the finance and insurance sector rose to £4,021 in the first three months of this year, up from £3,146 in the same period last year, TUC analysis showed. By contrast, average monthly pay in the UK rose to £2,413, up from £2,315. These figures put City bonuses at the highest since records began, dwarfing the average pay in almost all sectors.
In March, finance and insurance bonuses were 2.4 times larger than the average worker’s basic monthly pay. They were higher than average basic monthly pay in every other sector of the economy, with the exception of mining and quarrying.
The research comes as the cost-of-living crisis deepens, with the annual rate of inflation running at 9% and the regulator Ofgem announcing that the energy price cap is to rise by more than £800 in the autumn. This follows a 54% increase in April, and will take the average annual household energy bill to £2,800.
Real wages across the economy, adjusted for inflation, are down by £68 a month compared with a year ago. The situation is even worse for public sector workers, whose monthly real wages are on average £131 lower.
Beyond finance and insurance, other industries are turning to one-off payments to recruit more people amid labour shortages, potentially hampering more sustained rises in pay, according to the TUC.
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Its analysis showed record bonus payments in a number of sectors, including professional, scientific and technical services, real estate, arts and entertainment, administrative and support services, construction, wholesale trade, and accommodation and food.
The TUC is urging the government to tackle the crisis by introducing fair pay agreements across industrial sectors, and giving unions access to workplaces to tell workers about the benefits of union membership.
It wants to see the minimum wage lifted immediately to at least £10 an hour for all workers, irrespective of age, and has called for “decent pay rises” for all public service workers. It also repeated its calls for an increase in the number of bank holidays, saying UK workers have fewer than people in other countries.