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U.K. Finance Bonuses to Plummet as London Loses Ground

Bonuses for 2012 in London's financial sector will more than halve to 1.6 billion pounds ($2.5 billion) in total, a study found, and some shareholders are urging banks to cut pay even more.

London financial sector bonuses for 2012 - likely to be paid in January or February next year - will be more than 86 percent down on the 11.5 billion pounds worth of payouts in 2 0 07-2008, when dealmaking was booming just before the financial crisis, the CEBR data showed.

Base salaries have risen since then, partly in response to controversy over incentive-related bonuses, meaning overall levels of pay have not dropped by quite so much.

The CEBR, which had originally forecast bonuses of 2.3 billion pounds for 2012, predicted they would hit a low of 1.2 billion in 2015 before gently creeping upwards again.

Last year's bonuses totalled 4.4 billion pounds, it said.

"The biggest loser from this is the taxman, who typically earns more from City bonuses than the employees," CEBR Chief Executive Douglas McWilliams said in a statement.

McWilliams said government revenue from the City - including from corporation tax and other levies - would likely be around 40 billion pounds for 2012, down almost by half from the 70 billion banked in 2007/08.

In a separate study, the CEBR also forecast that Hong Kong would overtake London as the world's biggest international financial centre in 2015, as Asian markets grow.

Hong Kong employed less than half as many people in financial services than London in 2005, but job numbers in the Asian hub will have grown by almost 100,000 in the next three years.

Meanwhile the City will continue to shed jobs, with another 13,000 set to go next year.

Technically, London is already behind New York by finance employment levels, but the CEBR said many of the New York jobs were focused on servicing the domestic U.S. economy, meaning that for now London retains its crown as the top international centre.

Hong Kong has gained ground primarily because of more dynamic growth in Asian economies, the CEBR said, while the growing use of China's renminbi as a currency worldwide will also boost it as a centre.

Copyright 2012 by Reuters. All rights reserved.

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