A chastened City

Can we make a link between the chopping of 1,500 jobs, mostly in London and New York, by the Swiss banking giant UBS, and the news that the City of London Corporation has come up with a £300 million contribution to the financing of Crossrail, the long-awaited Heathrow-to-Docklands transport link? Well, connecting unrelated news events on any given day and extracting lessons from them is what columnists are supposed to be for. So let me have a go.

The jobs lost at UBS Investment Bank, which include that of its chairman and chief executive Huw Jenkins, are the tip of the iceberg of City redundancies to come this autumn. Not only are there huge suspected sub-prime-related losses yet to be announced by other banks, but the deal flow that has kept corporate financiers in private jets and ski-chalets these past several years is rapidly drying up. The acquisition of ABN Amro by Royal Bank of Scotland with Fortis and Santander, which everyone expects to go ahead this week, may be the last big takeover to reach completion for a while; the private equity industry has gone awfully quiet. Probably the best hope of earning a fat fee between now and Christmas is to secure a role in the inevitable break-up of Northern Rock.

So the City looks chastened, at least temporarily, and it will be fascinating to see how the new mood plays out in terms of pay and bonus levels, and corporate behaviour. You don’t have to be a socialist (or even a not-the-party-of-big-business Cameron Conservative) to think the financial sector has got into the habit of grossly and arrogantly overpaying itself these past 20 years, departing long ago from any comparability with salary levels in industry, commerce or public service.