The rise or fall of graduate pay?

It's time for investment banks to rethink the amount they pay graduate trainees, says the Association of Graduate Recruiters (AGR).

With average starting salaries for graduates joining investment banks weighing in at a hefty 35,000, compared to just 22,500 across all other industries, some commentators suggest that banks are overpaying their new joiners.

Not true, says AGR board member Ruth Stokes - banks are not paying enough. "If investment banks want to remain competitive in their field and attract the best candidates, they will have to look seriously look at increasing starting salaries," she says.

Research conducted by the AGR shows that the average salary for graduates joining investment banks has remained stagnant for the last three years. Combine that with the fact that most banks are based in London, which is one of the most expensive cities in the world, and investment banking might not look like quite such a lucrative career choice after all.

Graduate recruiters are alert to the dangers. One recruiter from a leading US bank gave a talk at a recent AGR conference on the subject.

Antonia Johnston, head of recruitment at UBS, says banks still lead the way on graduate pay, but "other industries have seen base salaries rising steadily over recent years."

Johnston says graduate starting salaries for 2006- 2007 are being set now. Could a big increase be on the cards?