Home Business NewsFinance News EU bonus cap could be severe blow to 2,700 UK firms

EU bonus cap could be severe blow to 2,700 UK firms

by LLB Editor
6th Mar 13 12:36 pm

The EU’s bonus cap could mean that 2,700 UK firms lose talent to the US and other emerging markets, City AM has reported.

“Sources at the Treasury and the City watchdog [FSA]” told the the paper that the firms’ competiveness will take a beating, as employees would leave UK firms to join companies that offer “generous bonuses”.

“The FSA’s remuneration rules cover ‘code staff’ across financial services, not just banks, and the bonus cap could end up being based on that,” said a regulatory source.

Proposals that Brussels should controls pays of companies in the EU and beyond means that bonus caps would be implemented unless a majority of shareholders votes to double that cap.

City firms have slammed the plans saying it would hamper flexibility of lenders and affect growth.

“The wide group of firms caught have very different business models, risk profiles, growth and revenue numbers,” a senior City figure told the paper.  

“However, it seems the cap is built specifically for banks and we are therefore worried about unintended consequences.

“We strongly suspect that the Europeans have not considered the impact of the cap on non-banks, let alone done a proper cost/benefit analysis. This will lead to dramatically higher base salaries, less flexibility and ultimately a divergence of the interests of employees and shareholders.”

The news comes after George Osborne’s negotiations with EU finance ministers didn’t materialise as none of the 26 states agreed that the cap is a bad idea.

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