Bonuses in the City are at a record-high and rising six times faster than wages, according to new analysis published by the TUC. Analysis of ONS data shows bonuses in the financial and insurance sector grew by 27.9% over the last year, six times faster than average wages in the same period, which grew by 4.2%. In nominal terms, this rate of growth saw the average bonus awarded in the finance and insurance sector rise from £3,146 in the first quarter of 2021 to £4,021 in the first quarter of 2022. In the same period, average monthly regular pay in the UK rose from £2,315 to £2,413 (in nominal terms).

Significant bonuses are common for high-paid City executives and come on top of salaries. The TUC highlights that there are also many low-paid workers in financial services, who get much smaller sums. These figures put City bonuses at the highest since records began – dwarfing average pay in almost all sectors. In March 2022, finance and insurance bonuses were 2.4 times larger than the average worker’s basic monthly pay, and higher than average basic monthly pay in every other sector of the economy, with the exception of mining and quarrying. City bonuses in March 2022 were worth a total of £5.9 billion.

The TUC warns that record-high pay-outs suggest that City executives’ bumper bonuses of the pre-financial crash era are back. The research comes as the cost-of-living crisis deepens, with the recent announcement that the energy price cap is set to rise by more than £800. The TUC says there is “no justification” for such “obscene” City bonuses, especially at a time soaring bills are hitting the country at large. Real wages across the economy are down by £68 a month compared to a year ago.

The situation is even more stark for public sector workers, with real wages in the public sector down by £131 a month compared to a year ago.

The union body adds that wages have been at a “standstill” for more than a decade, leaving working people at “breaking point” and badly exposed to soaring bills.

Beyond the finance and insurance sector, other sectors are turning to one-off payments – potentially hampering more sustained rises in pay. New analysis from the union body shows record bonus payments in a number of sectors, with some experiencing labour shortages – suggesting that firms could be using bonuses as opposed to consolidated pay rises to attract new recruits and retain existing staff.

These sectors include professional, scientific & technical services, real estate, arts and entertainment, administrative & support services, construction, wholesale trade, and accommodation & food.

The TUC warns this is a “sticking plaster approach” and won’t fix the fundamental problems in the labour market which have caused supply-chain chaos and worker shortages. The union is calling on the government and companies to tackle bonus culture and high executive pay by:

• Introducing maximum pay ratios so that bonuses are no more than ten per cent of total pay.
• Ensuring bonus schemes are open to all staff on the same terms – no matter their pay grade
• Ensuring workers are included on company pay committees.

The TUC is also calling on the government to tackle the cost-of-living crisis in a sustainable way and get pay rising across the economy by:

• Strengthening collective bargaining by giving unions access to workplaces to tell workers about the benefits of union membership and introducing fair pay agreements across industrial sectors.
• Boosting the minimum wage immediately to at least £10 an hour, for all workers irrespective of age.
• Funding decent pay rises for all public service workers to at least match the cost of living and begin to restore earnings lost over the last decade.

TUC General Secretary, Frances O’Grady, 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. The government needs to clamp down on greedy bonus culture by putting workers on company pay boards and introducing maximum pay ratios. And it’s time for the government to get wages rising across the economy by boosting the minimum wage immediately, funding decent pay rises for all public sector workers and introducing fair pay agreements for whole industries.”