UK body sees plunge in '08 bonuses from near-record

By Olesya Dmitracova

LONDON, May 8 (Reuters) - Bonuses dished out to London's financial professionals for this year's work will fall 40 percent from a surprisingly high payout for 2007 when the credit crisis unraveled, a British think-tank said on Thursday.

In its biannual report on London's economy, the Centre for Economics and Business Research (CEBR) predicts a 2008 bonus pool of 5.07 billion pounds ($9.9 billion), down from the near-record 8.51 billion pound payout for 2007.

That was second only to the 8.8 billion pounds paid to City of London's financiers for deal-heavy 2006, according to CEBR, and much more than the centre estimated earlier.

Troubles that started last year in the high-risk home loan market in the United States have led to deep losses at some of the world's biggest banks and a sharp slowdown in business.

"CEBR's research suggests that the pin-striped brigade will feel it in their pockets for some time to come," CEBR said.

In October the think-tank forecast a drop of 16 percent in 2007 bonuses and reiterated it to Reuters in February.

"A lot of people at the tail end of last year didn't expect the credit crunch to be this deep or last this long, and City activity held up better than we expected," said CEBR managing economist Dominic Walley.

However, he added, market sentiment has turned "pretty ugly" over the last three to four months and that will be reflected in the next bonus season, which typically runs from December to April.

CEBR said it expects financial companies will change the way they calculate bonuses, which rewards gains but does not punish losses, adding that hedge funds will be most affected.

"However, payouts in areas with more well-understood risks, such as bond trading, will remain largely unscathed," it said.

Bonuses will not return to previous highs until 2011, when CEBR forecasts a pool of 9.04 billion pounds. ($1=.5120 Pound) (Editing by Maureen Bavdek)