UK Bank Bosses Get Big Pay Raises While Workers Struggle

Pay for top bank bosses in the UK has reached its highest in over ten years. This is happening while many people struggle with the cost of living and low wages. Experts are talking about the big difference between what bosses earn and what workers earn.
By Newsroom | Business, United Kingdom |

Executive Compensation Soars as Average Worker Faces Economic Strain

The compensation packages for top executives in the UK's banking sector have reached their highest point in over ten years. This surge in executive pay contrasts sharply with the economic realities faced by many ordinary workers, who are contending with rising living costs and stagnant wages. Reports indicate a significant and growing disparity between the earnings of bank leaders and those of the average employee.

Background and Timeline of Rising Executive Pay

The trend of increasing bank executive pay has been developing over several years, with notable increases reported in recent times.

  • 2022: Reports indicated a substantial rise in bankers earning over €1 million, with the UK having a significantly higher number of such earners compared to other European nations. Bonuses for 2021 at some banks, like Lloyds, were expected to reach hundreds of millions.

  • 2023: Financial regulators in the UK decided to remove the cap on bankers' bonuses, a move intended to attract investment and align with international practices, particularly in the US.

  • 2025-2026: Annual reports for major banks like Barclays, NatWest, and Lloyds have highlighted substantial increases in boss pay, often following periods of bumper profits. This period also saw FTSE 100 chief executives earning record amounts, with their pay significantly outstripping the average UK worker's annual salary.

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The landscape of corporate governance and executive remuneration has also seen shifts. For instance, NatWest's expected return to full private ownership was anticipated to ease the process of raising executive pay.

Evidence of Pay Disparities

Multiple sources highlight the growing gap between executive and average worker pay.

  • High Earner Numbers: In 2022, the European Banking Authority reported that 3,519 bankers in the UK earned over €1 million annually, a figure substantially higher than in Germany.

  • Bonus Amounts: Specific examples include a merchant banker receiving €64.8 million, and two UK-based asset managers earning between €38 million and €39 million.

  • Pay Ratios: Reports from 2019 and 2025-2026 consistently show that top bank CEOs are paid multiples of the average UK worker's salary. In 2019, this ratio was 120:1. By 2025, FTSE 100 bosses were earning 122 times more than a median UK full-time worker. Some reports suggest top bosses can earn more in a few days than an average worker does in an entire year.

  • Profit vs. Pay: Bumper profits at banks such as Lloyds, Barclays, and NatWest in recent years have been directly linked to surges in bank boss pay.

  • Remuneration Reports: Analysis of remuneration reports from major UK banks, including Lloyds Banking Group and Royal Bank of Scotland, provides detailed data on executive compensation.

The Context of Economic Strain

While executive pay climbs, many households are experiencing financial pressure.

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  • Cost of Living Crisis: Millions of Britons are reportedly struggling with soaring bills and the ongoing cost of living crisis.

  • Wage Stagnation: The earnings of many workers have not kept pace with inflation, leading to real-term cuts in income. This situation is often referred to as "wage compression."

  • Worker Concerns: There is a growing disconnect between the rewards for bank bosses and their employees. Thousands of bank workers face job insecurity, partly due to banks exploring AI to boost efficiency and potentially cut employment.

Conflicting Perspectives on Executive Pay

Arguments for High Executive Pay

  • Global Talent War: In highly competitive sectors like M&A, banks offer substantial bonuses to attract and retain top talent.

  • Shareholder Interests: Proponents may argue that high executive pay is necessary to incentivize performance that ultimately benefits shareholders through increased profits.

  • Competitive Benchmarking: Banks operate in a global market, and executive compensation is often benchmarked against international standards, particularly in financial hubs like New York.

  • Post-Brexit Competitiveness: The removal of bonus caps was partly intended to enhance the UK's competitiveness against other global financial centers.

Concerns Regarding Executive Pay

  • Inequality: The widening gap between the highest and lowest earners raises significant concerns about economic inequality and fairness.

  • Erosion of Fairness: When executive pay rises sharply while ordinary workers face hardship, it can erode public trust and the sense of a fair economic system.

  • Corporate Excess: Extreme pay packages are seen by some as a form of corporate excess that can negatively impact employee morale and societal trust.

  • Inflationary Impact: Some research suggests a link between excessive CEO pay and higher inflation, alongside lower employee trust and job satisfaction.

Expert Analysis and Commentary

The scale of executive pay in the UK banking sector has drawn significant commentary from various groups.

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  • Union Leaders: Figures like Paul Nowak, General Secretary of the TUC, have called for government intervention to "bring back some fairness on pay," citing the struggles of lower-paid workers.

  • Equality and Rights Groups: Organizations focused on economic fairness often highlight the growing disparities and their potential societal impacts. Research from groups like the High Pay Centre has drawn attention to the issue.

  • Industry Analysts: Analysts observing remuneration reports note the trends in executive compensation and the factors driving these increases, such as profit performance and retention strategies. The European Banking Authority (EBA) provides data on high earners, while firms like E-reward analyze executive remuneration reports.

Conclusion and Implications

The data indicates a clear and sustained trend of increasing executive compensation within the UK banking sector, reaching levels not seen in over a decade. This trend is closely tied to periods of strong bank profits and a competitive global market for talent. However, this rise in top-tier pay exists in stark contrast to the economic challenges faced by a significant portion of the UK workforce, who are dealing with high living costs and subdued wage growth.

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The removal of the bankers' bonus cap in late 2023 further facilitates this upward pressure on pay. The persistent and widening pay gap raises fundamental questions about economic fairness, corporate responsibility, and the distribution of wealth generated by the financial industry. It also presents a challenge for policymakers seeking to balance economic growth with social equity. Future analysis will likely focus on the long-term societal impacts of these pay disparities and any policy responses that may emerge.

Sources

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Frequently Asked Questions

Q: Are bank bosses in the UK earning more money now?
Yes, pay for top bank bosses has reached its highest point in more than ten years.
Q: How does this compare to regular workers?
Many regular workers are finding it hard to pay for bills because of high costs and low pay increases.
Q: Why is this happening?
Banks have made big profits, and there is a global race to hire top talent. Also, rules on bonuses were changed.
Q: What do people think about this?
Some people worry about the big difference in pay and if it is fair. Others say high pay is needed to keep good leaders.
Q: What is the UK government doing?
The government has changed rules about bonus caps, hoping to help the economy. Some groups are asking for more fairness in pay.