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Goldman Sachs is removing a cap on bonuses for London-based staff, paving the way for it to resume making multimillion pound payouts to its best-performing traders and dealmakers.

Sky News can exclusively reveal that the Wall Street banking giant notified its UK employees on Thursday that it had decided to abolish the existing pay ratio imposed under European Union rules and which the government recently decided to scrap.

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In a video message to staff, Richard Gnodde, chief executive of Goldman Sachs International, which comprises its operations outside the US, said it had decided to bring its remuneration policy in Britain in line with its operations elsewhere in the world.

“We are a global firm and to the extent possible we adopt a consistent global approach across everything we do,” Mr Gnodde said in the message, which has been relayed to Sky News.

“The bonus cap rules were an important factor preventing us from being consistent in the area of compensation.”

He added that the shift would “mean lower fixed pay, but a higher proportion of discretionary compensation”, adding that it “also reflects the prudential objective of our regulators”.

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The removal of the cap means several hundred UK-based Goldman staff will now be eligible for variable pay worth up to 25 times their base salaries, according to insiders.

As a consequence, allowances which were introduced to help those employees deal with the cap will begin to be reduced from 1 July, Mr Gnodde told employees.

People close to the bank insisted, however, that the revised approach would not necessarily mean senior employees being paid more, but that they could now be appropriately rewarded for exceptional performance and that the move would allow Goldman more flexibility to manage its fixed cost base.

Goldman is among the first major investment banks to signal its intention to pursue a revised approach to remuneration in the wake of the cap’s abolition by UK regulators last October.

Under it, firms were prohibited from paying their material risk-takers – or most senior staff – more than twice their fixed pay in bonuses.

Some banks used the mechanism of a fixed-pay allowance in addition to employees’ base salaries to give them more flexibility to pay larger bonuses.

While Goldman’s move may draw controversy, the EU bonus cap drew criticism from many influential figures in finance over many years, including from Andrew Bailey, the Bank of England governor, who said in 2014 that it was “the wrong policy [and] the debate around it is misguided”.

During his ill-fated stint as chancellor, Kwasi Kwarteng moved to scrap the EU bonus cap, saying it would boost the international competitiveness of Britain’s financial services sector.

UK regulators agreed that scrapping the cap would aid financial stability by enabling firms to reduce pay faster during downturns or in scenarios where they needed to conserve capital.

Mr Gnodde has publicly endorsed the removal of the cap, saying in 2020 that doing so would “put the UK on the same footing, aside from the EU, with every other major financial centre”.

“Removing that ratio makes London a more attractive place for sure,” he said at the time.

“If I move a senior person between New York and London I am driving up the fixed cost of our operations. If that rule doesn’t exist, I don’t have to think about that.”

While Goldman is among the first to notify its employees about its amended stance on bonuses for UK staff, many of its peers, including bosses at lenders such as Deutsche Bank and Santander have also criticised the cap.

At its annual meeting on Friday, HSBC is expected to win shareholder approval to remove the two-to-one pay ratio.

Other firms are also understood to be reviewing their UK compensation practices in light of the cap’s abolition.

Many industry executives have argued that the cap actually encouraged greater risk-taking because it put smaller sums of money at risk for senior bankers.

Insiders also pointed out that because the bonus cap does not impose a limit on overall remuneration, it had placed upward pressure on salaries and allowances not linked to longer-term performance, and which could not be reduced or clawed back if failure or previous misconduct had subsequently emerged.

Responding to an enquiry from Sky News, a spokesman for Goldman said: “This approach gives us greater flexibility to manage fixed costs through the cycle and pay for performance.

“It brings the UK closer to the practice in other global financial centres, to support the UK as an attractive venue for talent.”

Goldman has often been in the vanguard of responding to changing public policy in relation to bankers’ pay.

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In 2010, it imposed a £1m pay ceiling on its UK staff after the then Labour government introduced a one-off tax on bank bonuses in response to the public outcry over the financial crisis.

Goldman’s decision to remove the two-to-one ratio comes as UK regulators also consult on the length of deferral periods for variable pay for senior bankers.

Mr Gnodde told staff on Thursday that Goldman would continue to lobby for closer global alignment on deferral periods, which would mean reducing the current UK duration from seven years.

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M&S tells agency workers to stay at home after cyberattack

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M&S tells agency workers to stay at home after cyberattack

Marks & Spencer (M&S) has ordered hundreds of agency workers at its main distribution centre to stay at home as it grapples with the unfolding impact of a cyberattack on Britain’s best-known retailer.

Sky News has learnt that roughly 200 people who had been due to undertake shift work at M&S’s vast Castle Donington clothing and homewares logistics centre in the East Midlands have been told not to come in amid the escalating crisis.

Agency staff make up about 20% of Castle Donington’s workforce, according to a source close to M&S.

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The retailer’s own employees who work at the site have been told to come in as usual, the source added.

“There is work for them to do,” they said.

M&S disclosed last week that it was suspending online orders as a result of the cyberattack, but has provided few other details about the nature and extent of the incident.

In its latest update to investors, the company said on Friday that its product range was “available to browse online, and our stores remain open and ready to welcome and serve customers”.

“We continue to manage the incident proactively and the M&S team – supported by leading experts – is working extremely hard to restore online operations and continue to serve customers well,” it added.

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It was unclear on Monday how long the disruption to M&S’s e-commerce operations would last, although retail executives said the cyberattack was “extensive” and that it could take the company some time to fully resolve its impact.

Shares in M&S slid a further 2.4% on Monday morning, following a sharp fall last week, as investors reacted to the absence of positive news about the incident.

M&S declined to comment further.

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Deliveroo shares surge 17% as £2.7bn takeover looms

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Deliveroo shares surge 17% as £2.7bn takeover looms

Shares in meal delivery platform Deliveroo have surged by 17% as investors react to news of a £2.7bn takeover proposal.

The company revealed after the market had closed on Friday that it had been in talks since 5 April with US rival DoorDash.

Deliveroo suggested then it was likely the 180p per share offer would be recommended, though full terms were yet to be agreed.

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At that price, the company’s founder and chief executive, Will Shu, would be in line for a windfall of more than £170m.

Deliveroo further announced, before trading on Monday, that it had suspended its £100m share buyback programme.

The opening share price reaction took the value to 171p per share – still shy of the 180p on the table – and well under the 390p per share flotation price seen in 2021.

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Deliveroo’s shares have weakened nearly 50% since their market debut.

The deal is not expected to face regulatory hurdles as it provides DoorDash access to 10 new markets where it currently has no presence.

But a takeover would likely represent a blow to the City of London given the anticipated loss of a tech-focused player.

Susannah Streeter, head of money and markets at Hargreaves Lansdown, said: “If the deal is done at that price, the company will fail to shake off the ‘Floperoo’ tag it was saddled with after its disastrous IPO debut in 2021.

“Even though Deliveroo has finally broken through into profitable territory, the prolonged bout of indigestion around its share price has continued.

“The surge in demand for home deliveries during the pandemic waned just as competition heated up. Deliveroo’s foray into grocery deliveries has helped it turn a profit but it’s still facing fierce rivals.”

She added: “The DoorDash Deliveroo deal will be unappetising for the government which has been trying to boost the number of tech companies listed in London.

“If Deliveroo is purchased it would join a stream of companies leaving the London Stock Exchange, with too few IPOs [initial public offerings] in the pipeline to make up the numbers.”

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US trade deal ‘possible’ but not ‘certain’, says senior minister

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US trade deal 'possible' but not 'certain', says senior minister

A trade deal with the US is “possible” but not “certain”, a senior minister has said as he struck a cautious tone about negotiations with the White House.

Pat McFadden, the Chancellor of the Duchy of Lancaster, told Sunday Morning with Trevor Phillips there was “a serious level of engagement going on at high levels” to secure a UK-US trade deal.

However, Mr McFadden, a key ally of Sir Keir Starmer, struck a more cautious tone than Chancellor Rachel Reeves on the prospect of a US trade deal, saying: “I think an agreement is possible – I don’t think it’s certain, and I don’t want to say it’s certain, but I think it’s possible.”

He went on to say the government wanted an “agreement in the UK’s interests” and not a “hasty deal”, amid fears from critics that Number 10 could acquiesce a deal that lowers food standards, for example, or changes certain taxes in a bid to persuade Donald Trump to lower some of the tariffs that have been placed on British goods.

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And asked about the timing of the deal – following recent reports an agreement was imminent – Mr McFadden said: “We’ll keep working with the United States and keep trying to get to an agreement in the coming weeks.”

As well as talks with the US, the UK has also ramped up its efforts with the EU, with suggestions it could include a new EU youth mobility scheme that would allow under-30s from the bloc to live, work and study in the UK and vice versa.

Mr McFadden said he believed the government could “improve upon” the Brexit deal struck by Boris Johnson, saying it had caused “an awful lot of bureaucracy and costs here in the UK”.

He said “first and foremost” on the government’s agenda was securing a food and agriculture and a veterinary agreement, saying it was “such an important area for the UK and an area where we’ve had so much extra cost and bureaucracy because of Brexit”.

He added: “But again, as with the United States, there’s no point in calling the game before it’s done. We’ve still got work to do, and we’re doing that work with our partners in the EU.”

The Cabinet Office minister also rejected suggestions the UK would have to choose between pursuing a trade deal with the US and one with the EU – the latter of which has banned chlorinated chicken in its markets – as has the UK – but which the US has historically wanted.

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On the issue of chlorinated chicken, Mr McFadden said the government had “made clear we will not water down animal welfare standards with either party”.

“But I don’t agree that it’s some fundamental choice beyond where we have to pick one trading partner rather than another. I think that’s to misunderstand the nature of the UK economy, and I don’t think would be in our interests to put all our eggs in one basket.”

Also speaking to Trevor Phillips was Tory leader Kemi Badenoch, who said the government should be close to closing the deal with the US “because we got very close last time President Trump was in office”.

She also insisted food standards should not be watered down in order to get a deal, saying she did not reach an agreement with Canada when she was in government for that reason.

“What Labour needs to do now is show that they can get a deal that isn’t making concessions, so we can have what we had last month before the trade tariffs, and we need serious people doing this,” she said.

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