FEATURE-Bankers, the rich, sit pretty as UK budget cuts loom

* Deep UK spending cuts, era of austerity looms

* Bankers defiant despite financial crisis

* Economic woes may prompt rich to give more to charity

By Mohammed Abbas

LONDON, May 19 (BestGrowthStock) – Britain is steeling itself for
painful spending cuts, but the good times are still rolling for
the rich, including the bankers blamed by many for the country’s
economic woes.

Rescued by taxpayer money, banks are booming again, while in
London’s upmarket shops on Bond Street and Savile Row, Rolex
watches and tailored suits are still flying off the shelves and
into Mercedes and Alfa Romeo sports cars parked outside.

Still, while conspicuous consumption may continue unabated,
there are signs that the rich may also be giving more to charity
as Britain prepares for an era of austerity.

The new Conservative-led government will publish a budget on
June 22 to reduce the record budget deficit — run up partly to
bail out banks hit by the 2008 financial crisis — and the
expected spending cuts are likely to be the deepest in 30 years.

The outlook for London’s bankers, however, seems brighter.

“I think it’s back to boom, boom time for banks. We’ve got
less competitors. Every bank’s share of business has gone up for
doing nothing,” said a banker who declined to be named in
London’s Canary Wharf financial district, home to banks
including HSBC (HSBA.L: ), Citibank (C.N: ) and Barclays (BARC.L: ).

The impact of a one-off British tax on bank bonuses last
year was softened as most banks absorbed the costs rather than
pass it on to employees, and some spread the levy across their
global networks, reducing the effect on London.

Meanwhile, banks are riding a global economic rebound,
keeping upward pressure on pay in the hunt for talented workers.

Lloyds (LLOY.L: ) and the Royal Bank of Scotland (RBS.L: ),
which both received state bail outs, have both beat expectations
and returned to profit in the first quarter.

Foreign banks, including Goldman Sachs (GS.N: ), JPMorgan
(JPM.N: ) and Deutsche Bank (DBKGn.DE: ), have sizeable British
operations and have reported bumper profits.

A February survey found bankers in London had received an
average bonus increase of 40 percent this year and most also
received a jump in base salary. [ID:nLDE61A1F4]

Countries that raided their coffers to bail out banks are
trying to coordinate to introduce new rules that will claw back
rescue money and reduce risky banking practices, but progress
has been slow with no major legislation agreed so far.

Among the rich in general, the collective wealth of
Britain’s 1,000 most affluent people rose by about a third in
the past year, according to the annual Sunday Times Rich List,
published last month alongside a story citing “soaring” fortunes
on the back of higher stock markets and resurgent banks.


Cashing in on hardening public attitudes to bankers and the
rich, politicians campaigning for Britain’s May 6 election
promised to crack down on banks and create “fairer” a society.

Britain’s new business secretary Vince Cable has vowed no
return to “business as normal” and new banking “disciplines”,
but his influence may be tempered by the ruling centre-right
Conservative Party’s traditional pro-market stance.

Members Prime Minister David Cameron and finance minister
George Osborne both come from wealthy, privileged backgrounds
while Cable’s left-leaning Liberal Democrat party is the junior
partner in the new coalition government.

Some in London’s finance industry, known as the City and on
which Britain’s economy heavily relies, were defiant.

“What is needed is the City to start growing the economy
again. People can bash banks and the City as much as they like,
but if you squash the City, you squash Britain’s economy,” said
a finance lawyer who declined to be named.

Other City workers said it was unfair to punish them all for
the bad decisions of a fraction of bank employees.

“We make sure everything we’ve done is legal. What more can
you do? The people responsible for the credit crunch are no more
than five or so people in a bank,” said the Canary Wharf banker.

Another said politicians were using to them to detract
attention from their failure to legislate good banking rules.

“Bankers are an easy scapegoat to deflect attention from the
poor performance of the politicians,” he said.

Far from contrite as the rest of Britain tightens its belt,
City workers questioned by Reuters said their spending, or that
of their richer colleagues, on luxury items had not dropped.

An April wealth report by the Economist Intelligence Unit
said: “The so-called new austerity does not apply to the very
wealthy. They continue to spend much the same amount as they did
before downturn, but they will be less flagrant.”


High-end shops in London’s expensive Mayfair district said
they had not seen demand fall, and luxury goods makers Moet
Hennessy Louis Vuitton (LVMH.PA: ) and Hermes (HRMS.PA: ) have
posted forecast-beating first quarter profit (Read more your timing to make a profit.)s, partly on higher
European sales.

But while conspicuous consumption may be on the rise again
among the wealthy, growing deprivation in the rest of society
may be prompting the rich to also flash their cash for charity.

In the first quarter of this year, the Charities Aid
Foundation (CAF), which helps bring charities and donors
together, said it had opened new charitable trust accounts
containing 70 million pounds ($101.2 million) in donations, more
than three times the amount in the same period last year.

“The UK economic outlook may still be uncertain but
according to figures from the CAF, philanthropic activity is
beginning to rise,” the organisation said last month.

New Philanthropy Capital (NPC), a charity consultancy and
think tank, said in March philanthropy was growing.

The past decade has seen more self-made, rather than
inherited wealth, and rich people who remember their humble
roots are seen as more likely to give, or give more, to charity.

Also, high-profile giving is encouraging others to give
more, with NPC citing the philanthropy of Microsoft founder Bill
Gates, a tripling of newspaper coverage of the issue and the
British television show “Secret Millionaire”, in which a wealthy
individual seeks causes to donate to.

“The current economic downturn appears to be prompting some
to re-evaluate their social values,” the NPC said in a report.

Stock Investing

(Editing by Alison Williams)

FEATURE-Bankers, the rich, sit pretty as UK budget cuts loom