Lifestyle versus long hours in the Square Mile

SOMETHING shocking is happening in the City. In management bunkers around the investment banking community, executives are wrestling with the concept of lifestyle.

The industry has traditionally been proud of its macho attitude to work. Employees were encouraged to spend most of their lives in the office in return for pay rewards beyond the dreams of avarice.

Now, change is afoot. Commentators have talked glibly of the 11 September terrorist attacks forcing people to reassess their attitude to work. But in investment banking this is a small part of a much more complex jigsaw.

Last year was not a good one for the sector. The hi-tech/internet bubble definitively burst, the US economy stalled and recession was the talk of London and New York. Companies were uninterested in takeover deals and investors were reluctant to buy equities. Investment banking profits plummeted and thousands of staff were axed. Most of those remaining will learn over the next few weeks what their bonuses for 2001 will be. They are going to be well down on 2000 and many people will be disappointed.

The problem is that this is unlikely to be a one-off phenomenon. Strategic thinkers believe pay is not going to return to the heady levels of the late 1990s. Attitudes are more cautious, there is an increased emphasis on cost control and a determination not to repeat the mistakes of the past - overpaying in the good times and panicking in the bad times.

Managers are aware, however, that bankers are not altruistic by nature. They only work their socks off in anticipation of enormous pay cheques. If the rewards go down, so does the incentive to burn the midnight oil in the office. Executives at even the top-tier investment banks are therefore quietly calculating how to reduce the hours employees spend at work. They talk of work/life balance, of part-time opportunities and even the need for a more diverse workforce.

Britannic chief executive Danny O'Neill hit the headlines this week when he resigned to spend more time with his family. Once, investment bankers would have fought to be first to pour scorn on this decision. Now many who can afford to do so are making the same choice. For those left at the coalface, life could be very different in future.

Mayo sauce

'IT'S so unfair,' is a popular refrain from children forced into a situation they dislike after being blamed for something of which they feel unjustly accused.

John Mayo's confessional in the Financial Times has something of the sulky child about it. Since being ousted last July as Marconi's finance director, Mayo has shared the blame with chief executive Lord Simpson for blowing £3bn of the company's money and taking a great business to the brink of bankruptcy.

Now he tells us the company did not have £3bn in the bank and was not as marvellous as everyone says it was. He claims too that he was ready to sell Marconi at the height of the dotcom boom, because he knew the hype was unsustainable and the group could not reach the top alone.

Even if investors take him at his word, they are still left with the knowledge that Mayo did not persuade other board members to auction off their business and that he then remained in situ as Marconi shares slid from £9 to pennies.

Mayo must have amassed a fair amount of money during his career and is thought to have received more than £1m from Marconi following his premature departure. He is only 45, however, and would need a phenomenally large nest egg to continue to live in the style to which he has undoubtedly become accustomed.

Perhaps Mayo's attempt to set the record straight is his way of looking for a new job.

Rate focus

THE latest figures on December retail sales were unsettling as they showed a fall from November to December when everyone was expecting a rise.

Some economists were prompted to conclude that a cut in interest rates next month is much more likely than previously. Others dismissed the data, pointing out that consumers still spent a lot more in December 2001 than the previous year and that the trend in interest rates is up. Those who believe a cut is on the cards are right but for slightly wrong reasons.

The Bank has just begun work on its quarterly Inflation Report, due to be published next month. Inflation, including the effect of lower mortgages, is at a 40-year low of 0.7% and even if mortgages are stripped out, prices are rising by less than 2% annually. When Chancellor Gordon Brown handed responsibility for interest rates to the Bank, he said it should ensure inflation remains between 1.5% and 3.5%, preferably just over 2%.

Insiders say the Bank is sticking closely to this mandate. Bank Governor Sir Edward George recently implied he was worried by consumer spending but those in the know say too much was inferred from the remarks. The focus remains on price growth, not retail sales.

The Bank's monetary policy committee tends to change interest rates more frequently when the Inflation Report is released than at other times. A cut next month - to below 4% - must be on the cards.