The UK economy is currently 4% smaller than its peak in March 2008 and 2.8% smaller than in September 2008 when Lehman Brothers collapsed, the Telegraph reported.
Of the 2.8% fall, the contraction in banking activity has accounted for one percentage point, analysis of Office for National Statistics (ONS) figures showed.
The impact banks have had on the economy is completely disproportionate to the industry’s size, the paper reports. Banks account for just 5.1% of national output, but are to blame for around 35% of the national decline even excluding the knock-on effect of tighter credit on businesses and households.
So far this year, the banking industry has shrunk by 2.6%, which follows a 5.1% fall in 2010 and 7% drop in 2009.
However, despite the banking industry’s massive decline, an estimated £6.7bn of bonuses were paid in the City of London in the 2010-2011 financial year, according to the Centre for Economic & Business Research (CEBR). That was a fall of 8% on the previous year, but basic pay jumped 7%.