UK ends cap on salary bonuses at banks

The Financial Times reports that the UK bankers' bonus cap is about to be scrapped. This measure remains a “legacy” of European laws and, from the authorities’ point of view, represents a barrier that “limits labor mobility” and is impractical outside the EU.

According to the newspaper, this measure comes in the wake of a consultation conducted this year about the possibility of canceling the 2014 rule that sets bonuses at double the basic salary for employees of banks, construction companies, and investment companies.

At the time the rule was imposed, the UK was still a member of the European Union and some British regulators were opposed to it. However, since Brexit, the British government wants to remove this restriction, in order to make London more attractive to financial companies.

In a report released on Tuesday, the Bank of England's Prudential Regulation Authority stated that “no reward cap is imposed in other major international financial centers outside the EU.” “The maximum bonus has been identified as a factor limiting labor movement,” he continued, adding that it is an “obstacle” that must be removed in the country.

The organization added that the changes will allow companies to reduce wages more quickly in economic crises, making them safer from a financial stability perspective.

The new rules will take effect on October 31 and will apply to this fiscal year and future years.

Financial company leaders were reluctant to announce that the UK would scrap the measure, fearing a public backlash. They originally opposed the cap because it forced them to increase base pay to retain employees.

Raising this limit faces criticism from leftist parties. For example, Labour's Darren Jones said that “at a time when families are struggling with the cost of living and mortgages, this decision tells you everything you need to know about this Conservative government's priorities.”

Paul Nowak, general secretary of the Trades Union Congress (the federation that brings together Britain's main unions), described the decision as “outrageous”. “At a time when millions of people across the country are struggling to survive, this is an insult to workers,” he said.