London Briefing: It's the height of the holiday season in the City and, among those left looking after the shop, all the talk is of a bumper bonus season ahead for the investment banking community, writes Fiona Walsh.

Record pay-outs are expected this year on the back of the global boom in mergers and acquisitions. It may be quiet now, but it's been a frantic year for bids and deals, both among public companies and cash-rich private equity firms. Deals such as the £15 billion (€22.1 billion) takeover of airports operator BAA by the Spanish group Ferrovial can generate fees running to £100 million.

The more contested the deal, the more advisers are involved and the higher the fees.

The biggest beneficiaries among investment bankers will be those who bring in the deals. These highly-valued individuals can expect to receive multimillion pound bonuses and the exclusive "£10 million club" will certainly swell in ranks once the cheques have been handed out at Christmas-time.

But even bottom-of-the-rung investment bankers are likely to be paid bonuses of up to five times their £150,000 base salary.

It's impossible to work out who gets what, as most of the recipients are below board level and thus their pay packages do not have to be disclosed.

There's plenty of speculation, of course, and the Centre for Economic and Business Research has estimated that a total of more than £20 billion will be paid out this year, up from £19 billion last year.

Leading the largesse will be Merrill Lynch, Lehman Brothers, Morgan Stanley and UBS, all of which have been at the forefront of takeover activity in the City.

Bonuses are a contentious issue, whether they be in the boardroom or on the trading floor. Five years ago, the then deputy chairman of Royal Bank of Scotland, Sir George Mathewson, caused a storm of protest when he dismissed complaints about his £750,000 bonus by saying it "wouldn't give you bragging power in a Soho wine bar".

Bankers these days tend to be more circumspect about their riches and it's been a while since we were treated to tales of deals being celebrated in top London restaurants with a wine bill of £44,000, as five happy Barclays Capital bankers did a few years ago. The five departed from their jobs shortly after the storm of negative publicity.

But a large proportion of the cash is being quietly spent and such vast sums have a huge knock-on effect - and not just on takings at the swanky jewellery shops in Canary Wharf and the City's Royal Exchange retail complex, where one store is already said to have drawn up a waiting list of traders wanting to buy a £34,000 limited edition Patek Phillipe watch.

High-spending bankers have been blamed for pushing up farmland prices to record levels, as they splash out on a home in the country.

So many have snapped up rural estates that locals complain they are being priced out of the housing market.

The effect is also seen in the Home Counties housing market and in London, particularly in the exclusive "bonus belt" area around Chelsea in west London.

But apart from reflecting a bumper year for business, the bonuses are considered vital by the investment banks if they are to retain their top talent.

There has been a spate of poaching in recent months and the leading firms are desperate to hold on to their key deal-makers. If investment bankers don't like the number of noughts on their bonus cheque, they will simply walk across the street to the nearest rival prepared to pay up.

Meanwhile, we're all no doubt delighted to hear that the legal profession is not being left out. Research by the Lawyer magazine this week revealed that 392 London-based lawyers earned packages of £1 million or more last year.

Topping the league table was Linklaters, one of the so-called "magic circle" of London legal firms, which boasts 124 partners earning £1 million or more. Rival Slaughter & May has 90 million-a-year partners, but jumps to the top of the league if rankings are based on percentages, with an astonishing 75 per cent of the firm's 121 equity partners earning more than £1 million in 2005/06.

For the larger Linklaters, the figure is 35 per cent.

Cut-throat world of cut-price fashion

The words "pot", "kettle" and "black" spring to mind on news that the cut-price clothing group Primark, which owns Penneys in Ireland, has launched legal action against rival value retailer Matalan.

After all, value retailers such as Primark and Matalan pride themselves on "fast fashion", where they take trends from the catwalk and conjure up affordable High Street versions within a matter of weeks.

At issue is the "Rebel" brand, which Primark says Matalan has hijacked. It wants its rival to destroy the £4-a-throw "hoodies" which carry the Rebel name.

Primark has itself been sued by rival retailers H&M and Monsoon in the past for design right infringement, although the cases were settled out of court.

The case reflects the increasingly cut-throat battle between the value retailers, as Matalan struggles to reclaim trade lost to the rapidly-expanding Primark.

The spat is unlikely to make much difference to takings at either company, but the lawyers should do well out of it.

• Fiona Walsh writes for the Guardian newspaper in London