GUEST COMMENT: Why the EU bonus crackdown will not benefit the Gulf

The European Union only approved tough new restrictions on banker bonuses yesterday, but many on the ground in Dubai are already assuming people are packing their bags and looking east for new opportunities.

However, an exodus is unlikely for a number of reasons.

Yesterday EU lawmakers rubber-stamped its proposals to crackdown on banker bonuses. Banks will be required to defer 40-60% of bonuses for three to five years and only 20-30% of variable pay can be paid upfront in cash - the toughest restrictions worldwide.

By contrast, the Middle East's tax-free environment and light-touch approach to regulating pay makes the region look like a very attractive proposition to much-maligned Western bankers.

I believe there will be two immediate implications. Firstly, those investment bankers working for international banks who transferred to the Gulf from London and New York, but kept their original contracts, will quickly look to switch to a local contract in a bid to get around any US or EU restrictions. We've already seen pre-emptive action in this respect.

Secondly, I'd expect a decent number of investment bankers who have covered the Middle East from an EU location - be that London, Paris or Frankfurt - but have held off moving here because of family reasons will now bite the bullet come to the region.

But the Middle East job market will simply not support any mass migration towards the region.

It's been a difficult 12 months for investment banking in the region. M&A volumes fell nearly 50% in 2009, for instance, and many bankers have received drastically reduced bonuses. On average, I believe that bonuses have shrunk by 60% on peak levels during 2007-08.

What's more, the majority of people have accepted this reduction and the traditional post-bonus recruitment spree has been decidedly more muted this year. Although finding key talent remains an issue, base pay has also largely remained static.

So far this year, it's been a solid start, with fees beginning to look healthy again. However, in terms of recruitment, both local and international banks remain cautious and fussy.

If you're an Arabic speaker, have a proven track-record in the region and can prove that you can add value to the organisation, you may be considered. For the most part, however, banks are focused on retaining their top deal-makers and replacing those they cannot keep hold of.

Since the UK introduced its 50% income tax rate in April, we've had numerous calls from people in London who would love to relocate here. Unfortunately, we've largely been unable to find a slot for them.

So, the EU bonus clampdown may well prompt bankers to eye the Gulf region again. But the making the move here isn't as easy as you might think.

The author is the managing director of an international capital markets executive search firm based in Dubai