As the country continues to recover from the most troubling recession in memory, UK banks plan on raking it in through 2011. The estimated profit is about 1 billion pounds per week, and collectively the top 5 UK lenders plan on earning over 51 billion pounds this year. On the flip side feelings of frustration continue to dominate the countryside, as citizens try to manage the new austerity measures handed to them by the UK government.
Earnings for the big banks are sure to prompt year-end bonuses over the next few weeks. Combine this with the deep spending cuts and the everyday Brit can’t help but throw up their hands and question the system. The one thing the citizens do have on their side is time, as each day that passes brings full recovery that much closer.
The upcoming bonus season might feel a little odd to some bankers. For example, Lloyds TSB chief executive, Eric Daniels, gave up part of his bonus pay within the last 2 years, under public scrutiny. But since profits in the banking sector, at least, have returned to normalcy, senior bank executives are feeling obligated again to enjoy the fruits of their labor.
The return to big profits by the banking sector has spurned new talks regarding levies on banks. One change taking affect already is a new charge banks will be handing to the government based on their outstanding loan amounts. It is expected the new charge will provide the government with about 2.5 billion pounds per year.
Chuka Umunna, a Labor member of the Treasury Select committee, believes the 2.5 billion pounds is microscopic compared with the 50 billion in profits the banks are bringing in, saying: “These profits lend credence to those who argue that the bank levy should be set at a higher rate.”
He added: “They can well afford to contribute more to the Exchequer to reduce the budget deficit.”
Lord Oakeshott remarked on the taxpayers bailing out RBS and Lloyds, saying: “Bankers working for RBS and Lloyds would not be in work if they had not been bailed out by the taxpayer.
“Taxpayers are entitled to know the size of the pay packages they are effectively signing off at the state-owned banks, just as they do for high-paid workers in the public service.”
The Center for Economics and Business Research has estimated the banking bonuses will increase approximately 25% by the year 2014. The profits being experienced are more than being welcomed by the banking industry. Since the crisis of 2008 unfolded, prosperous days were just something the sector hoped for. Now, it is more than just a goal, but a firm reality.
Even though the top lending banks, RBS, Lloyds, HSBC, and Barclays are enjoying a 40% increase over last year, smaller businesses are still scraping to get by. They continue in their efforts to obtain credit from the big banks without much luck.
Credit still remains tight, which prompted Lord Oakeshott to remark: “UK banks are still not doing the job they are meant to be doing, which is to support small- and medium-sized businesses and maintain the supply of -mortgages to homeowners.”
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