Strip clubs, bars feel the pain of London banking cuts
Bar owner Salvatore Calabrese mixes a glass of “Salvatore’s Legacy” during an attempt to make the world’s most expensive cocktail at Salvatore’s Playboy Club in London, England on Oct.11, 2012.
Thousands of job losses in London's high-profile banking industry are causing ripple effects across a wide array of businesses that rely on the wealth of City workers.
Bars, restaurants, real estate agents and even strip clubs that rely on the often extravagant spending of bankers in London's financial district are reporting a decline in trade from steep job losses and cuts in bonuses.
"We are worried, we are always worried," Pierre Smit, front of house manager of 1 Lombard Street, a high profile restaurant in the heart of the City, told CNBC.
"It's such a sensitive market that anything negative that happens in the City has a direct impact on our business. Companies don't have the money to spend like before, there isn't the same amount of money on company cards. The spend-per-head has dropped tremendously," he said.
Banks across Europe have been speeding up job cuts as they seek to improve capital ratios. While many of those job cuts are global in nature, the 320,000 employees in London's financial sector are being hit hard.
Earlier this week, Britain's Barclays bank announced that it would cut 3,700 jobs globally in 2013 as part of a strategic overhaul, with 420 jobs in its U.K. technology and infrastructure division to go. Meanwhile,another British bank RBS is cutting a further 3,500 jobs in the U.K. and elsewhere.
Dutch banking and insurance group ING said it would slash 7,500 jobs, while Swiss bank UBS has cut 13,500 jobs since the crisis began in 2007. In total, 160,000 jobs have been lost from the banking sector worldwide, according to Reuters.
Smit told CNBC that restaurants like 1 Lombard Street,situated opposite the Bank of England and offering three course meals for 65 pounds ($100) per head, have to work harder to make sure their loyal customers return.
"The lunch trade has been steady but only now is the dinner trade starting to pick up a bit, but there was definitely a decline over the past year," he added. "Clients want the offers from a specials menu rather than the a la carte."
Strip clubs are also feeling the pinch.
"They tell me inside on the floor that business is going down,the customers are spending less money, there's a smaller amount of people coming in now," a source at a prominent central London strip club told CNBC.
Investment bankers have been notorious for racking up big bills during long boozy "working" lunches, bonus celebrations and corporate entertainment. The stereotype of the fast-living, cash-flashing City worker has been strengthened by recent scandals involving widespread rate-fixing and risky trading.
However, banks have been overhauling their compensation policies, cutting bonus pots, including claw-back clauses, and changing the bonus structure to deferred payouts and shares rather than cash.
Demanding More for Less
George Pell is general manager at the private members club,the Brompton Club in South Kensington, a London borough known for its affluent inhabitants, boutiques and designer stores. Pell told CNBC that he'd noticed a change in the clientele and their expectations.
"The crazy money is moving away from London, hedge funds are re-locating to Geneva now…There are certainly less celebrations," he said, adding that many of the club's predominantly financial sector clientele was in London private equity firms.
"People expect more value for money now. They expect good food, good music and better service. The days when it was booming and you could be more nonchalant are gone," he said.
London's booming property sector was a traditional investment destination for banking bonuses.
"If you go back five years when the city was booming, City and financial sector employees made up about 50 percent of our customers. But since there have been the job cuts this has dropped by around a third to about 30 percent," Liam Bailey, head of residential research at property consultants Knight Frank told CNBC.
"The financial sector as a source of wealth has become less important. Now we're seeing more clients from the tech and media sectors,"Bailey added.
But not everyone is feeling the pain. Park Lane in London's wealthiest district of Mayfair is home to a number of exclusive car dealerships such as Stratstone Aston Martin. Sales executive David Bartlett told CNBC that Aston Martin only attracted a "minimal amount of people from the banking world."
"In Aston Martin world we're not too badly affected by job cuts in banking because our clients from the City tend to be the top, senior executives – not those on the sharp end [being made redundant]," Bartlett said. "We never used to see bonus season arriving and think 'Let's get lots of stock in,' because most of our clients are not from that industry."
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