The deregulation of London's financial markets has set off a boom in salaries paid to financial professionals here. As British financial firms expand and diversify and overseas companies -- many of them from the United States -- enter the market, the demand for experienced manpower is soaring.
A team of three securities analysts made headlines recently when they moved together to Morgan Grenfell, one of London's largest merchant banks.
Reports are that they split a $750,000 "golden hello" in addition to an annual cash package worth about $150,000 each.
"Morgan Grenfell are starting a whole brokerage operation from scratch," commented one senior executive at another London brokerage house, "and they need to pay funny money to lure the stars away from other houses."
He said his firm also is paying wages and benefits worth about $150,000 to senior analysts, up "more than 25 percent" from a year ago.
The increases, he said, are due not only to the deregulation coming in October, but also to 1985's bull market.
In many businesses, Britain's wage levels are at, or near, the lowest in western Europe. A senior manager in the manufacturing industry, typically in his late forties, earns about $40,000 a year, while a typical chief executive of a major corporation earns about $82,000. Benefits, known as "perks," typically add up to 30 percent of these figures, estimates London consultants Remuneration Economics.
The average laborer in Britain earns about $300 a week. Perks in his case usually are limited to subsidized lunch in the company canteen.
Edward Clark, director of the Financial Services Division at KornFerry, an international executive search firm, said American financial firms remain London's top payers. "Partners in American investment banks can look forward this year to seven-figure sums in total cash compensation," he said.
The dramatic increase in financial salaries and the attendant publicity have generated political controversy here. The Conservative Party is closely linked with "The City," as the financial sector is called, not only because it supports deregulation, but because many Conservative parliamentarians earn their living in banks or brokerage houses. Serving in Parliament still is considered a part-time job by many.
Prime Minister Margaret Thatcher recently signaled her disapproval of the salary boom.
She told a representative of the Confederation of British Industry, which speaks for Britain's manufacturing companies, that the high salaries ". . . cause me great concern. I understand the resentment. If I feel strongly about what they are taking, as compared to what Cabinet ministers are taking, then look at the people who are struggling to get work."
But the Thatcher government so far has rejected calls to levy a special tax on high earners in the City.
"Why should she?" said Clark. "In her heart, she believes in entrepreneurs and free enterprise. She just hates all the publicity. And we're talking, at most, about 500 people who are earning a lot of money." By "a lot," Clark explains he means in excess of $500,000 a year.
Market professionals see the salary boom as a natural consequence of the internationalization of the world's financial markets.
"For years, the UK has been behind on remuneration," said a broker at the London office of a major American house, "Now, London has suddenly caught up. A first-class governments trader in New York and a first-class Eurobond trader here are now roughly comparable."
According to a director of a London merchant bank that is expanding into market-making in equities: "To get an absolutely top-class market-maker today, one has to pay $300,000. That is at least double the figure prevailing a year or two ago."
On top of the cash package, employes of London financial firms get perks, which are traditionally much more wide-ranging than benefits offered by American companies. They typically include company cars, low-cost mortgages and loans, and generous stock options and pensions.
With the boom in the Eurobond sector, Eurobond traders have enjoyed substantial increases in income. "Most people are now getting a basic [salary] of around 50,000 pounds [$75,000]. But with bonuses, the really good guys are getting over 100,000 pounds," a 30-year-old Eurobond trader at the London subsidiary of a French merchant bank said.
She said standard perks include "your basic BMW [automobile], and a 4 percent mortgage on either 50,000 or 100,000 pounds, depending on which bank you work for." (The current UK free-market mortgage rate is about 11 percent.)
One British stockbroker predicts the current good times in the City will not last. "Wait until the next bear market, and many of these high-priced superstars will just be laid off," he said. "It will be like coconuts falling off trees."