DECEMBER signals the advent of Christmas: a time for celebration, relaxation, and over-indulgence. But less so this year. The last 12 months have been terrible for those plying their trades in London’s Square Mile.
Those who still have a job should be grateful. The City has been butchered this year, and more than a few chickens (or turkeys) are coming home to roost. The Centre for Economics and Business Research (CEBR) estimates that the City has shed 11 per cent of its workforce since 2011, and will lose a further 5 per cent by the end of 2013. I’ve seen some tough years in the quarter of a century that I’ve worked in the markets, but this year certainly ranks among the worst.
Few of the talented people that I know – yes there are still one or two of them left in the City – will admit to making any money this year. They are suffering from one of the biggest liquidity droughts in decades. If they are making any money, they seem to be keeping a low profile.
December is also the start of bonus season, where City workers have been accustomed to picking up juicy rewards before they do their Christmas shopping. But the Grinch has well and truly stolen Christmas this year. The CEBR estimates that the bonus pool for City workers will fall by 35 per cent in 2012 to £4.4bn, down by over 60 per cent since the peak in 2008. And next year is likely to be worse, as the bonus pool is forecast to shrink to £1.6bn.
Why is it that when I speak to market strategists, they tell me they are rushed off their feet, and yet there is so little going on in the markets? I reckon the answer is fear of not being seen to be busy, at a time when the axe is falling.
This week’s Autumn Statement from our divided government will, once again, show how clueless it is in its quest to engineer growth. I cringe when I read about some of the rabbits that chancellor George Osborne is trying to pull out of his hat.
It looks as though the pick of Osborne’s inept policy ideas is going to be another raid on private pension contributions. Of course, lowering the tax free threshold for higher rate taxpayers below £50,000 will make the Liberal Democrats happy, but it will add explosives to the ticking pensions time bomb. Many middle-income earners will be hit, and it will hardly encourage more people to save for their retirement. Nice work Osborne.
I apologise for the miserable discourse, but I am struggling to see any festive joy this year for the City. Bah humbug.
Steve Sedgwick co-anchors Squawk Box Europe on CNBC.