City bonuses to shrink by half

Morgan Stanley and Goldman Sachs have put their usual October meetings to decide bonus payments on ice while they cope with the worldwide financial crisis.

Most payments will be almost entirely in shares and compensation experts say that the City's £8.5billion bonus pot last year is likely to be halved at least.

Although news of the falling bonus payments is unlikely to provoke much sympathy, many City staff rely on year-end bonuses to fund day-to-day expenses.

A slump in bonuses is likely to hit London house prices.

Leading figures have protested about the City's bonus culture and Gordon Brown said some bonuses were simply "unacceptable".

For a lucky few, however, there is no sign of the gravy train coming to a standstill.

The elite investment bankers at Lehman Brothers - whose collapse was perhaps the most shocking failure of the credit crunch - have been offered large cash bonuses just for staying with the company until autumn 2009.

Nomura, the Japanese bank which has just bought Lehman's European and Asian arms comprising about 2,500 staff, wants to lock in those it regards as vital.

One banker who had been offered the payment told the Financial Times: "I think it's attractive."