There will be no point in working in private equity, and other effects of the coalition government

Now that we have a more accurate idea who will be governing the UK for the next five years, it's also possible to say with more accuracy what the implications for the City of London will be.

Here, based, on what's currently known, are some suggestions:

1) No one will want to work in private equity any more

It seems certain that capital gains tax will rise in line with income tax (ie. from 18% to up to 50%).

There may be loopholes - according to the FT there will be 'generous exemptions for profits related to business.' However, if the carried interest paid to senior staff at private equity funds is taxed at the new higher rate, one of the major incentives for moving into private equity will disappear.

2) It will be more difficult to retire early

Hgher taxes on capital gains will make it harder to retire at 35 and live off your investments.

3) Banking salaries will rise again

Now that Vince 'Scargills in pinstripes' Cable is in charge of business and banks, it seems likely that some form of bonus restrictions will go ahead. Reuters reports that both parties want to 'tackle' bonuses. With luck, the outcome will be less severe than the restriction to 2.5k in cash with the remainder payable over 5 years that Cable had been gunning for (and plans to publish the names of everyone earning more than 200k will be quietly shelved).

Limits on bonuses will result in banks hiking salaries even higher than they are already.

4) Jobs in London may go

The City needs to hope that the G20 agrees to a global banking levy when it meets later this month.

This is because it looks like the new coalition will go ahead with a levy whether the rest of the world does or not.

If imposed unilaterally, a levy would clearly be detrimental for City employment, although much will depend upon the level.

Alphaville points out that the Lib Dems have been proposing a levy of 10% to fund their increase in the tax free personal allowance to 10k. Ominously for banks, the increase in the tax free personal allowance is going ahead.

5) Both the FSA and the UK's universal banks will be given a stay of execution

The FSA is not being totally dismantled, but may only have 'oversight' of banking supervision. This being the case, it may be able to hire a new chief executive.

The separation of trading from retail banking activities is to be subject to an independent commission. With no proof that Glass Steagall would have prevented the financial crisis, Barclays, HSBC and RBS may yet be safe in their current form.