Anyone would think it was 2006 again. Following a recent labour market release from Britain's Office of National Statistics (ONS), the British press has worked itself into a state of excitement over the fact that average weekly bonuses in the UK rose 64.4% year-on-year in April 2013. The increase was driven by a 168% rise in bonuses in the financial services sector. Bankers must be laughing into their Bollinger baths, surely?
Scratch the surface, however, and the 168% increase in banking bonuses isn't necessarily evidence of resurgent fat cattery after all. According to ONS figures, banking bonuses are diminutive - and becoming more so.
In April 2013, the average bonus paid to employees in Britain's finance and insurance industry was £255 a week, according to the ONS. On an annual basis, this should work out at £13k. However, this would be to assume that banks keep paying bonuses at the same rate throughout the year, which they don't; bonuses vary wildly on a weekly and monthly basis. In 2012, the average annual banking bonus in the UK was, in fact, just £2.6k.
The oscillations in weekly banking bonuses and salaries since 2000 are shown below. On a ten year basis, average weekly bonuses in the UK financial services sector aren't increasing: since the peaks of 2006, the biannual highs have been decreasing. In 2012, annual bonuses in Britain's financial services industry fell by 16%.
ONS data also shows that in the UK, financial services is no longer the highest paying sector to work in: that accolade now goes to mining and quarrying.
While banking bonuses averaged £255 a week in April 2013, bonuses in mining and quarrying were a quite respectable £230 a week - up 72% on the previous year. More importantly though, the average mining and quarrying professional in the UK earned £13.3k in 2012, compared with £12k for the average person working in banking and financial services. Average mining and quarrying pay has increased consistently every year since 2000. However, average banking pay fell by 4% in 2002, by 9% in 2009 and by 16% in 2012 - the downside is becoming deeper. The average annual British financial services bonus has fallen 28% since 2008...
This is not to say that everyone working in banking should flood the mines. The banking and financial services industry is still a far, far bigger UK employer than mining and quarrying industry. Financial services created 26,000 vacancies between March and May 2013 according to the ONS. Mining and quarrying created 2,000.
However, the mining and quarrying world is showing signs of expanding - there were 3.7 vacancies for every 100 people employed in the sector between March and May this year. In financial services, there were 2.5.
The British mining and quarrying industry is small, growing and increasingly generous to its employees. When it comes to banking, the opposite applies.
Needless to say, there are caveats. The ONS's pay figures, which are pre-tax, seem abnormally low and include everyone working in any kind of financial services job anywhere in the UK. Who in the City of London earns only £12k a year? Would an experienced front-office banker really tolerate a mere £3k bonus (assuming, of course, that they're not zeroed)?
It can be argued, however, that pay in the City is so disproportionately large that it skews figures for the UK's financial services industry as a whole. On this basis, the statistics suggest that pay in London banks is falling, with bonuses falling most of all. Experienced bankers can't do much about it, but young people casting about for a career might be advised to give the extractive industries a glance.