by Michael Smith (Veshengro)
If the provisional EU deal to cap bankers’ bonuses is confirmed, the UK is set to become a ‘zombie country’, which will have handed its position as a world financial center on a plate to New York, Switzerland or Hong Kong. That is the opinion of a City recruiter who has launched a stinging attack on a decision which he calls a vote winner for the public and a disaster for the economy.
While bankers may not be top of the popularity list, according to a report undertaken by PWC for The City of London Corporation the UK financial services sector contributes £27.7 billion in employment taxes – which at almost 12% of government receipts is by far the biggest contributor. And when you include all the other contributions such as corporation tax, the figure rises to around £63 billion – again a massive 12% of total government tax receipts.
Adrian Kinnersley, Managing Director of Twenty Recruitment says that capping bonuses to 100% of basic salaries will have a number of negative effects.
“For one thing, banks will increase base salaries in order to compensate the talent they want to keep – that’s actually bad for the bank as it will stop them keeping their fixed costs low and reduce the flexibility of their overall cost base. It will also mean a haemorrhaging of talent out of Europe – people will leave for the higher paid opportunities in the US, Asia and Switzerland. Financial services skill sets are very globally mobile – and are still in high demand. Wage arbitrage is and always has been an effective way to source talent!”
Kinnersley says that it is not just talent that will move on.
“Many banks may see this as an unnecessarily invasive move given that they have already taken steps to control compensation levels with long term incentive plans. This will be seen by many organizations as the final regulatory straw and encourage institutions to relocate their headquarters overseas and take talent, tax revenues and income with them. The figures speak for themselves – if we lose that tax revenue and income then our economy is finished.”
“This latest move, combined with the Tobin transaction tax makes running a financial services business in Europe extremely uncompetitive when compared with the US and Asia which have not gone as far.”
The nightmare scenario could be that the UK ends up having to leave Europe says Kinnersley. “If the City haemorrhages talent, institutions, tax income and spending power then we will have to leave as we will never be able to re-balance our economy and grow.”
But the only reason the banking sector has such a large influence is because of the fact that consecutive British governments have aimed to make Britain into a service industry and banking country, having destroyed almost all manufacturing in this country.
Were it not for that factor then banking would be of little influence to the economy, as it used to be, with out GDP coming from manufacturing, as used to be the case in the years before “Iron Lady” and her ilk.
Not that New Labor, formed out of the original Labor Party, which was a party of the working class, by Tony Blair and his cronies, and now relaunched as One Nation Labor (G-d help us), reversed any of the actions by the Tories under Thatcher and then Haig, et al. They continued with the destruction of industry in the UK at the benefit of banking.
The UK was to be, as envisaged by Thatcher and successor governments, red and blue, the banking capital – at least London – of Europe, ideally of the world, to the detriment of the working class and the traditional industries that made this country great once upon a time.
We need insource all our manufacturing back to the UK rather than having it all done by slave labor in China and other countries in the Far East. That way we will have employment for most if not all and and economy not dependent on a banking sector that distorts everything.
If, in addition to a repatriation of manufacture and thus jobs we also make products once again repairable and to last and additional sector of services will be created by way of small repair shops and such like.
And banking must be returned to what it was initially intended for, namely taking deposits and lending to businesses and people, but no more than three-quarters of their deposit base.
The large banks must be broken up into small manageable entities again that serve the customer and into those parts that dabble on the market and the two sectors must be totally separate from each other. It was thus and must become thus again.
Considering, however, the huge influence that banks and bankers have over politicians in the UK, with many of them, no doubt, getting some nice backhanders from that side of the fence, none of this is going to be happening unless the people finally wake up and tell the politicians where to go.
We do not need a new government, we need a new system...