Are the good times ready to roll?

IN THE HEART of the City, at the corner of Cannon Street and King William Street, stands a Mercedes-Benz dealership. In pride of place in the window is a sleek, silver sports car, the SL 55 AMG, priced at £94,995. It is midday, the start of the lunchtime rush, when traders and City bigshots can leave their desks and do some shopping. But the showroom, which was only opened in March, is devoid of potential customers.

'It's quiet,‘ admits salesman Jeremy Endicott, who says the imminent bonus season has not yet brought a rush of custom. ?They're talking about it, but they're not yet putting their money where their mouth is.‘

Across the road, House of Fraser has just opened a five-storey palace of consumption. The accessories department, a shrine to Versace, Gucci and Chanel, is deadly quiet. The most expensive item, a £5000 leather handbag by Louella, goes unadmired. Sales manager Lisa Carey says it is too early to gauge whether demand is picking up. The store only opened a month ago. ?It's 30 years since there was a proper department store in the City,‘ she says.

Up the road at the Royal Exchange, former home of the Liffe derivatives market, things look a bit busier. At jeweller Theo Fennell, a pinstriped businessman is looking for drop ear-rings for his wife. ?I'm on a budget, £400 to £500,î he hastily tells the sales assistant before she can bring out the seriously dear merchandise.

Opposite, at Tiffany & Co, quite a crowd is peering at the rocks. There is nothing so vulgar as a price tag here, but one solitaire diamond ring is £52,000, I am told. Even here, however, no one seems to be buying much. It is the same story everywhere. There are baubles galore to be snapped up as Christmas heaves into view but the well-heeled consumers of the Square Mile are for the moment keeping their wallets parked.

However, you can almost detect a spring in the step of City workers. The reason is obvious - the dramatic bounce in the stock market, the key barometer for the City even for those not directly involved in equities. Six months ago, the chances of any bonus for tens of thousands of City workers looked slim. Markets had been plunging and thousands were losing their jobs. For the third year running, bonuses looked likely to be cut or scrapped.

Since then, however, the FTSE 100 index has bounced by 31%. Trading volumes of most securities are up. Mergers and acquisitions are being done. Floats are being dusted down. Suddenly those bonuses - a key chunk of the average City worker's income - look a growing possibility. They won't be nearly as large as the cheques handed out in the glory days of 1998 to 2000 but for many City workers these days, anything will be, well, a bonus.

According to one City headhunter, bonuses are likely to be between 10% and 25% up on last year so long as financial markets don't slump back during the rest of the year. The bonus season starts in December and goes on until March, depending on individual employers' year ends.

Employment prospects, too, are picking up. Doug McWilliams of the Centre for Economics and Business Research says City employment, which has been falling for the past two and a half years, has bottomed out at about 300,000. ?It's too early to say that good times are returning to the City but we're probably at the end of the bad times,‘ he says. He predicts a slow recovery in jobs to 320,000 by 2007 - the same level as the peak of early 2001.

Many City firms are looking to plug gaps in their depleted ranks although nothing much will happen before bonuses are paid and stars are liberated from their golden chains. ?Then you'll see things pick up,‘ the headhunter says.

There is growing evidence that the temperature in the City may finally be lifting after a three-year Ice Age. This week Merrill Lynch, the global securities group with huge London operations, reported a doubling of profits worldwide. Lehman Brothers, another major City player, revealed plans to give staff £6000 bonuses for helping to recruit suitable executives.

Confidence of companies in the financial services sector has suddenly perked up and is running at its highest for four years, according to a survey from employers' body the CBI and PricewaterhouseCoopers. Even so, City workers are in no mood to spend money before it has actually been paid. Although the big culls of the past 18 months are probably over, job security remains an issue. The hire-and-fire culture has not changed and no one is immune from the sack.

Meanwhile, the rally is still patchy and bonuses will vary hugely. While equity traders are enjoying a new lease of life and the rocket scientists in options and credit derivatives continue to thrive, other corners of the City remain moribund. Mergers and acquisitions remains tough. Fund management struggles as costs come under pressure. Life assurance is battling against a lack of confidence in small savers.

Then there is the uncertainty. The disparity between the winners and losers has never been greater. It is not always those who make the biggest profits contribution who receive the greatest rewards. Firms are looking to use bonuses to retain tomorrow's rainmakers rather than reward yesterday's stars.

Newton Fund Managers recently upset its bond specialists, who produced star performances, by handing the lion's share of bonuses to equities people, who did poorly. The lesson is that no one is assuming anything until those bonus cheques are actually banked. That Mercedes may not shift for a while yet.

Fingers crossed for restaurants revival

ANECDOTAL evidence suggests that this is the toughest time City restaurateurs have had in a dozen years. One of London's leading figures in the restaurant industry said last month that the summer had been a ?struggle‘ because of the lack of tourists, high-spending Arabs and investment bankers who have suffered the double hit of low bonuses and decreased expense accounts.

‘If we don't get a big boost in the run-up to Christmas, a lot of people are going to go to the wall,‘ said the restaurateur. Already this year, Raymond Blanc's chain of restaurants has gone bust and Aldo Zilli, one of London's most esteemed chefs, had to come to a voluntary arrangement with his creditors to remain solvent. ?If a chef with the reputation of Zilli can lose the plot, then so can anyone,‘ says an uncharacteristically pessimistic Marco Pierre White.

While famous restaurants such as Mirabelle and Le Gavroche (and Gordon Ramsay's variable offerings) are keeping their heads above water, more than 120 leading restaurants have closed some branches this year, including such luminaries as Alastair Little, Belgo, Bibo Cibo and Cafe Spice Namaste.

Other famous places to shut branches, as listed in the Harden's restaurant guide, include the formerly famous Aykoku Kaku, Bellamy's, Morton's, Bubb's (in the City), Chinon, Chives, Christophers in Victoria, Fish and Foxtrot Oscar in south London. Harden's by no means comprehensive take on the crisis nevertheless gives a snapshot of the wild vagaries in the industry. Fame is no sinecure, as Sir Terence Conran discovered when his West End restaurants Quaglino and Mezzo were more than half empty for the first two years of the new millennium.

However, there is also a trend to downgrade, as witnessed by Gary Rhodes, the celebrity television chef who opted out of his contract with Sodexho earlier this year despite a £350,000 package, and has now set up elsewhere in the City. His Michelin-starred restaurant, City Rhodes, opposite accountants Deloitte & Touche, has been taken over by Marco Pierre White.