Sunday 25 September 2022 06:44 PM Bankers from New York and Edinburgh set to flood into London after Kwasi ... trends now

London is set to attract greater numbers of bankers and fund managers from New York and Edinburgh after Kwasi Kwarteng scrapped the cap on bonuses in Friday's mini-budget.

The limit - set at 100 per cent of bankers' salary, or double with shareholder approval - was introduced by the European Union after the 2008 financial crisis.

But the Chancellor said it was having little positive effect and was hindering London's attractiveness as an investment destination.

He told MPs the move would encourage global banks to create jobs, invest, and pay taxes in the City.

Mr Kwarteng also scrapped the top 45p rate of tax and cut 1p from the basic rate in the biggest package of tax cuts by a British Government for half a century. 

And despite Friday's announcements causing the pound to drop to a 37-year low, finance sources have told the Telegraph that scrapping the bonus cap has sparked immediate interest in the U.S., with investment banks expected to move more staff to Britain.

One American banking source told the newspaper: 'This makes things more flexible for banks, it removes a barrier to people considering moving here from other locations.'

Another added: 'Instead of bringing someone to London and whacking up their salary, they can maintain a lower base salary and pay the rest through bonuses. It is better performance-related, and helps manage their fixed costs far better.'

A key complaint of the cap on bonuses was that it forced banks to push up executives' salaries in order to remain competitive. This locked them into higher costs and limited their ability to reduce rewards from individuals who performed poorly.

The chief executive of financial services advocacy group The City UK, Miles Celic, said scrapping the cap shows that the UK is 'open for business and ambitious'.