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FTSE 100 Directors' Incomes Soar By 49% Despite Recession Fears

FTSE 100 directors have seen their total earnings rise by 49% over the last year to hit an average of nearly £2.7m, according to a report.

Research by Income Data Services (IDS) said that while basic pay had not increased dramatically in the past year, bonuses and incentives had boosted their pay packets.

The average bonus package went up from £737,624 in 2010 to £906,044 in 2011, according to IDS.

In 2010, the same group saw total earnings rise 55%, meaning that since the 2009 recession, their incomes have gone up by almost 75%. In June, IDS showed that FTSE 100 directors had on average £2.8m in final salary pension pots.

The rises come against a backdrop of stagnant wage growth and rising unemployment in the UK.

The UK’s jobless numbers hit a 17-year high of 2.57m people in October, and average households have been squeezed by spiraling fuel cost, high rents and below-inflation pay growth. The average private sector pay deal was just 2.6%, against retail price inflation that hit 5.6% in September.

The UK is also seen to be teetering on the brink of a second recession.

Even jobs in the City are likely to be trimmed back in the coming year, according to the Centre for Economics and Business Research (CEBR), which forecast that 27,000 jobs in the finance and professional services industry could be lost across 2011-2012. This would take employment in the sector to 1998 levels, CEBR said.

Prime Minister David Cameron, speaking at the Commonwealth Heads of Government Summit in Perth, Australia, said that Britain expected to see more accountability on executive pay.

Steve Tatton, editor of the IDS report, said: “At a time when employees are experiencing real wage cuts and risk losing their livelihoods, without further explanation it may be difficult for FTSE 100 companies to justify the significant increase in earnings awarded to their directors.

“The pay gap between the boardroom and the shop floor does not yet show any signs of closing.”

Speaking on BBC Radio 4 this morning, Deborah Hargreaves, chair of the High Pay Commission, said that it was very hard to justify the rises, and that the complexity and opacity of pay packages needed to be addressed.

"We have got a closed shop here and someone needs to break it open," she said.

In response to criticism, one of the UK's most outspoken executives, WPP's Sir Martin Sorrell, told Sky News that executive incentives help to make British businesses more competitive.

"Pay is about base pay – true," Sorrell, who reportedly earns £1.5m per year in basic salary, said.

"It’s also about incentives, both short and long-term incentives and if that’s the way the High Pay Commission wants to play it, you will end up with less competitive, less well-run companies who either go elsewhere or go into private equity.

"If that’s what you want, fine, that will be the end result and Britain on the world stage will be even less competitive than it is now. So don’t crimp those companies that are trying to build global operations competitively."