City bonuses will be cut by at least 15 per cent this year as the turmoil in global financial markets takes its toll on investment bank profits.

The forecast from the Centre for Economics and Business Research (CEBR), an independent think-tank, is expected to affect prices of top-end London homes. Bonuses totalled £8.8 billion in 2006, unleashing up to £6 billion of spending on London homes, according to Savills, the property agents.

This year banks will cut back, with many junior financiers receiving no bonus at all. Douglas McWilliams, head of the CEBR and a former economic adviser to the CBI, said: “The drop in bonuses will be 15 per cent, at least. It could be more if the City turns out to have made bigger losses on sub-prime mortgatge lending.”

Simon Rubinsohn, chief economist at the Royal Institution of Chartered Surveyors, predicted that London house prices would stagnate next year.

Paying less to junior financiers to help to retain seniors will hit the mid-market hardest. For the past three years typical bonuses of several hundred thousand pounds have propped up prices of Central London flats and terraced houses valued at between £400,000 and £1.3 million.

Mr McWilliams said: “There will be more separation between the sheep and the goats this year. There will be those they want to give assistance to and those they do not mind losing. A small number could get nothing.”

Third-quarter figures yesterday from Lehman Brothers, which employs 3,000 people in London, indicated that Wall Street’s big investment banks were already preparing bonus cuts. It set aside $2.1 billion (£1 billion) in salary and bonuses at the end of its third quarter. That was about $60 million more than this time last year, but the bank’s global head-count has ballooned 16 per cent since then to 28,783.

The third quarterly compensation bill was also a 22 per cent fall from what Lehman set aside at the end of its second quarter this year. Head-count over the same three-month period rose 1.7 per cent.

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