💷 UK Financial Services and the Return of the Mega Bonus
Abstract
In 2025, UK financial services professionals received the highest bonuses in the world, a direct consequence of the government’s decision to remove the cap on banker bonuses. This policy change has not only reshaped compensation structures in London’s financial hub but also signaled a strategic pivot to bolster the UK’s global competitiveness post-Brexit.
Background
The bonus cap, introduced by the EU in the aftermath of the 2008 financial crisis, limited variable pay to 100% of fixed salary (or 200% with shareholder approval). Post-Brexit, the UK found itself with the autonomy to diverge from EU financial regulations. In 2023, the Prudential Regulation Authority (PRA) announced the removal of this cap, with full effect by 2024.
Economic Rationale
- Attracting Global Talent: The UK aims to reclaim its status as the most attractive financial center by offering globally competitive remuneration packages.
- Boosting Productivity: Proponents argue that higher bonuses incentivize performance, encourage risk-taking, and reward innovation.
- Post-Brexit Strategy: With firms considering EU alternatives like Frankfurt, Dublin, and Paris, the UK government is leveraging compensation freedom to retain financial giants.
Emerging Trends
- Increased Bonus-to-Salary Ratios: Top investment banks now offer bonuses that can exceed 300–400% of fixed salaries for senior roles.
- Widening Pay Gaps: While the top echelons benefit, concerns are growing over pay disparity within financial institutions.
- Reputational Risks: Critics argue that removing the cap revives the “casino capitalism” culture that led to the 2008 crisis.
Global Implications
This move is closely watched by other financial centers. If successful, it may pressure jurisdictions with tighter regulations to reconsider compensation policies. Simultaneously, it reopens debates on ethical compensation, long-term incentives, and systemic risk.
