Pessimists worry that this springtime slowdown is something deeper, more structural and troublesome
The April pay packet has traditionally been a fat one. But bonus season no longer delivers the largesse that City workers once enjoyed — not to mention the boost to luxury retailers, car dealerships and estate agents, where much of the spoils ended up being spent.
So how lucky might FT Money readers be feeling this year? Broadly speaking, bonuses in the financial services sector are down by about 10-15 per cent across the board compared with last year, says Nick Miller of Odgers Berndtson, the executive search firm.
And nowadays, there are very few people in the City who are paid a stonking great bonus in cash on day one. Far more likely is for all or part of the bonus to be deferred for a certain period, or paid in shares rather than cash, and to be subject to clawback over several years.
So, bad news for fine wine merchants, expensive watch shops and anyone trying to sell a property. But regardless of whether your bank balance has been boosted by a bonus, going on a spending spree seems to be far from most people’s priorities at this point in the year.
I can’t quite put my finger on it, but there is a more sombre mood hanging over the Square Mile right now. Anecdotally, my industry contacts report a reticence to make decisions and sign off on deals. Restaurants and pubs are less buzzy and every day seems to bring another bad news story about the property market.
You could blame all of this on a growing nervousness about the referendum on June 23 — and many are doing just that.
Even N Brown, the plus-size clothing retailer, this week blamed Brexit uncertainty (and the retail industry’s old chestnut of bad weather) for subdued sales of its XXL clothing. I’m sure they won’t be the last.
The optimists would look forward to a post-Brexit bounce, assuming the UK votes to remain part of the EU, but the pessimists worry that this springtime slowdown is something deeper, more structural and troublesome.
Let’s start with the optimists. When it comes to the wider UK economy, Old Mutual’s Richard Buxton is one of the most upbeat.
Responding to the statistics being pumped out by both sides of the referendum campaign, the fund chief this week urged UK businesses to “keep calm and carry on”, warning that putting investment on hold due to uncertainty about the outcome risked fuelling a lack of confidence, anticipating a “pipeline of promising companies seeking a listing once the uncertainty of June’s vote is out of the way”.
Mr Buxton said that if anyone was in any doubt which way the great British public would vote, they should look to the bookies’ odds, not the polls. “Despite all the campaigning, the odds to remain in the EU have barely changed: 2-1 on we stay in Europe,” he said.
Nevertheless, I am not expecting a sudden snap back to “business as usual” on June 24. I am taking my cue not from the equities market, but the property sector.
Traditionally, the “spring selling season” has been boosted by well-remunerated bankers seeking a bigger pile in town, or a second home in the country.
Even if they did get a good bonus, the new stamp duty rules (which have distorted transactions so much that sales in March rose 77 per cent on the previous year) make buy-to-lets and holiday cottages even more pricey.
James Pace, head of estate agent Knight Frank’s Chelsea office, says that in the good old days he would see a pick-up in activity in the first few months of the year from bankers who had an idea of what their bonus would be. Not any more.
In recent years, the gap has been amply filled by overseas buyers. So much so, that in some parts of London the skyline is dominated with towers of high-rise flats sold off-plan to foreign buyers. Many are now trying to turn them for a profit as they reach completion, but are finding the market a bit sticky and are cutting their asking prices.